The average American family cannot afford to buy a home in 25 states and the District of Columbia.
Most Americans cannot afford to buy a home in half the states according to data compiled by How Much. The How Much team estimated the amount of income needed to buy an average home with a 30-year mortgage; and a 10% down payment, in 50 states and the District of Columbia.
The amount of income needed to buy a home exceeded the U.S. Median Household Income in 25 states and the Nation’s Capital. The U.S. Census Bureau calculated that the average American household made around $59,039 a year in 2016.
There are 25 states where the income needed to purchase the average home exceeds $59,039, a Simplepost list based on How Much’s data indicates. The situation in the District of Columbia was even worse – a person needs an income of $138,440 a year to buy a home in the nation’s capital.
Most Americans can no longer afford to buy a Home
If How Much’s data is correct the American dream of universal home ownership is dead. Most Americans now live in areas where they cannot afford to buy the average home with an ordinary mortgage.
There were 31 states in which the income needed to buy a home exceeded the median household income, Simplepost calculated. That means there are 31 states in which the average resident cannot afford to buy the typical home.
The housing crisis is far worse than we have been led to believe – if this data is correct. If that was not scary enough, the data shows that most of the nation is now in a real estate bubble. Most citizens cannot afford most of the homes on the market.
The income needed purchase a home exceeded the median income in all the nation’s most populous states. That included; California, New York, Texas, and Florida.
Equally frightening is the fact is that there were only two mainland high-income states where the median income exceeded the income needed to buy a home. One of those states was New Jersey where the median income was $76,126 a year and the amount needed to buy a home was $69,640. The other is Maryland where the average household income is $78,945 a year and the amount needed to buy a house was $72,200 annually.
Will Income Inequality Lead to a Real Estate Bubble?
Realtors, investors and property owners should beware because there are seven states; California, Hawaii, Oregon, New York, Colorado, Montana, and Massachusetts, where the cash flow needed to buy a home exceeds the median income household income by more than $20,000.
There is only one state where the revenue needed to buy a home is more than double the median income. That state is Hawaii; where the median income is $74,511 a year, and the income needed to buy a home is $153,520 a year.
California comes close to that horrendous benchmark; you need to make $120,120 a year to buy the average home in the Golden State. The average salary there is $67,739 a year, making homes out of reach for most Californians.
Colorado is also bad; a household needs to make $100,200 a year to buy the average home in that state. The median household in the Centennial State is $65,685 a year.
Basic income fans will note that the average median income in Alaska is $76,440 a year, but only $67,280 a year is needed to buy a home in the Final Frontier. Alaska is the only state that pays a basic income in the form of a $2,072 annual payment from the Permanent Fund. That fund pays oil and mineral revenues back to residents.
A House is becoming an Impossible Dream for the Residents of these States
What’s truly frightening is that the average home price now exceeds the median income in a number of low-income states. For example, it takes a yearly income of $67,280 to buy a home in Arizona; the average annual take-home pay for a household in that state is $53,558 a year.
The median household income in Alabama is around $46,257 a year, but it takes $47,960 a year to buy a home in that state. The average income in Florida was $50,860 a year, but it a take-home pay of $70,360 a year is needed to purchase a home in the Sunshine State.
The median income in Idaho is $54,807 a year but it would take $70,360 a year to buy the average home in that state. The average household in Louisiana makes $45,320 a year but it would take $50,320 a year to buy the average home there.
The median household income in Mississippi is $41,754 a year, but it would take an income of $44,360 a year to buy the average home in that state. The average family in Montana makes around $50,027 a year, but that household would need $75,720 a year to purchase the average home there.
The median household income in New Mexico is $46,748 a year but a family needs to make $54,880 a year to buy a house in that state. The typical income in North Carolina is $50,584 a year for a household; a family needs to bring home $63,480 a year to buy the average home in the Tar Heel State.
There were a number of states where the amount needed to buy a home was well below the median income. Those states were either in the Rust Belt; Ohio, Michigan, Wisconsin, West Virginia, or the Great Plains; Kansas, North and South Dakota, Oklahoma. Disturbingly, there was only one Western State; Wyoming, where the median income exceeded the pay-level need to buy a home.
Where the Average Person can afford a Home in America
People that can live anywhere; such as the retired, freelancers, consultants, professional investors or speculators, and those working from home, would be well advised to move to a state where the median income significantly exceeds the amount needed to afford a home.
States for those people to consider include:
- An income of $38,400 a year is needed to buy the average home. The median income is $52,334.
- Wisconin. The median household income is $56,811 annually but the pay needed to buy a home is $50,080 a year.
- West Virginia. The average income is $43,385 a year, but it only requires $38,280 buy the average home.
- Wyoming. The salary needed to buy a home in the Cowboy State is $58,000 a year but the median income is $59,882 annually.
- Michigan. A household will need to make $40,800 a year to purchase a home but the median income is $52,492 a year.
- Kentucky. An income of $44,360 will purchase the average home in the Blue Grass state but the median household income is $46,659 a year.
- Illinois. A household needs $53,880 to buy the average home in the Land of Lincoln. The median household income there is $60,960 a year.
- Indiana. This state boasts a median income of $52,314 but only $42,560 a year is needed to buy the average home.
- Nebraska The median household income is $56,927 a year. A household needs to make $51,520 a year to buy the average house in the Cornhusker State.
- Iowa. A family needs to make $44,360 to afford the average home, but the median household income is $56,247 a year.
- Pennsylvania. The median income in the Keystone State is $56,907 a year but only $47,960 is required to afford the average home.
- Alaska. The median income is $76,440 a year but only $67,280 a year is needed to buy a home in the Final Frontier. Alaska is the only state that pays a basic income; in the form of a $2,072 annual payment from the Permanent Fund. That fund pays oil and mineral revenues back to residents.
Where the Affordable Homes are
A tip for those searching for affordable housing is to look in manufacturing areas. The number of factory jobs has fallen dramatically in the last 30 years but average salaries in manufacturing are relatively high, meaning housing supply exceeds demand in those areas.
Another tip is to shop around; there are undoubtedly many pockets of low priced housing in some states. In Colorado, real estate prices are low in the old steel town of Pueblo and in Trinidad in the far southern part of the state. There are also islands of high-income in some relatively poor states, such as the Jackson Hole region, in Wyoming, that distort prices.
A disturbing trend is that affordable housing in today’s America is often far from the jobs. Areas with high employment often have high home prices, a sure sign that demand is not meeting supply.
The discrepancies in income and housing might change soon because of last year’s Republican tax bill. That law did cap the mortgage deduction for the income tax at $500,000. Such an action might discourage some home buyers; and drive down housing prices in some places, particularly resort areas where the affluent purchase second homes.
One thing is clear much of the nation is dangerously close to a real estate bubble. Incomes will have to rise significantly; or housing prices will need to fall dramatically, to avoid serious political and social unrest in America.
Housing prices are out of control and will become a political issue this year if the bubble fails to burst. Realtors and real-estate speculators would be advised to put their profits in the stock market or cryptocurrencies, property values are heading for a crash. Renters would be well-advised to put off buying for the foreseeable future; because the housing market is insane, and is headed for some sort of crash in the near future.