It's no secret that housing prices have gone up since 2020, and high interest rates have not helped matters. Now it appears the dream of owning a home is out of reach for many Americans.
According to new datareleased Monday by Bankrate, it takes an income of over $100,000 to afford a typical home in 22 states.
To afford a home, Bankrate says housing expenses should consist of no more than 28% of a person's gross income. Someone with $100,000 of income could afford a monthly housing payment of up to $2,333.
According to Bankrate, the median cost for a home in January 2024 was $402,343, which is up by 46% compared to January 2020. To be able to afford a $402,343 home, it takes an income of $110,871, according to Bankrate.
In January 2020, a $100,000 income was needed to buy the median home in five states – California, Hawaii, Massachusetts, New York and Washington. Four years later, a six-figure income was needed in 22 states: Arizona, California, Colorado, Connecticut, Florida, Hawaii, Idaho, Maryland, Massachusetts, Maine, Montana, Nevada, New Hampshire, New Jersey, New York, Oregon, Rhode Island, Texas, Utah, Vermont, Virginia and Washington.
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The five states that require the lowest yearly income to buy a home are Mississippi, Ohio, Arkansas, Indiana and Kentucky. In Mississippi, $63,043 is how much annual income it takes to buy the median home. The median home in Mississippi sells for just over $228,000, according to Bankrate. That's compared to over $739,000 in California.
Although prices are high, those wanting to buy a home should not wait in hopes of costs coming down, said Bankrate housing market analyst Jeff Ostrowski in a press release.
"If you’re ready to buy, then buy. There’s no guarantee that the market will become more favorable for buyers. For instance, mortgage rates are expected to fall in 2024, and that means more buyers will be competing for homes," he said.
The new data comes days after data from Redfin showed it takes an income of about $76,000 a year to afford a basic starter home in the U.S. as of February. Four years ago, the typical American needed just over $40,000 a year to afford a starter home.
“The pandemic housing-market boom changed the definition of a starter home,” said Redfin senior economist Elijah de la Campa. “A decade ago, many people thought of a starter home as a small three-bedroom single-family house. Now that type of home could cost seven figures, especially in expensive parts of the country. The most affordable homes are much smaller and often require a lot of work to make them habitable — which makes them cost even more."
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