Potential homebuyers in 22 states and the District of Columbia now need a six-figure salary to afford a median-priced home, according to a recent Bankrate analysis. The median home price stands at $402,343, and the required average annual income to purchase such a home has surged to $110,871, nearly a 50% increase from 2020.
Key Findings:
- Income Requirements:
- General Increase: Four years ago, only six states and DC had a six-figure salary requirement. Now, almost half the country does.
- Regional Variations: In states like Hawaii, California, D.C., Massachusetts, and Washington, potential buyers need an income between $156,814 and $197,057. Conversely, in Mississippi, Ohio, Arkansas, Indiana, and Kentucky, the required income ranges from $63,043 to $65,186.
- Factors Driving Up Costs:
- High Mortgage Rates: The average rate for a 30-year fixed mortgage is now 7.01%, nearly double from five years ago.
- Inflation: Persistent inflation, particularly in shelter and gasoline prices, has contributed to higher mortgage rates.
- Low Housing Inventory: Limited housing stock exacerbates the affordability crisis.
- Economic Context:
- Federal Reserve Policies: The Fed has raised interest rates to a 23-year high (5.25% – 5.5%) to combat inflation, with no immediate plans to lower rates.
- Market Trends: Despite these challenges, there are signs of increased housing inventory, with an 8.8% rise in total homes for sale in February compared to the previous year.
For potential homebuyers, understanding these economic conditions and regional variations is crucial. Consulting with financial professionals and staying informed about market trends can help navigate these challenging times.
You Need to Make Six Figures to Buy a Home in Almost Half of the U.S. – CPA Practice Advisor
