How Much Income is Needed to Afford a Home in the USA?

How much household income is needed to afford a home in the US? If you wanted to afford the median priced home it would take household income of $99,589 — with the median priced home priced at $417,600.

Income needed to afford a home in the US has decreased 9.55% year-over-year while the median home price has increased in price from $407,100 to $416,700. How is this possible? The 30-year fixed mortgage rate was 7.31% the year prior — compared to the current 30-year fixed rate of 6.08%.

Table of contents

• Income to afford a home
• What impacts affordability?
• Calculation breakdown example
• Income needed in major cities
• Most expensive states
• Most affordable states
• Who is still able to afford a home?

Houshold income to afford a home purchase

Purchasing a home has become increasingly expensive with prospective homebuyers now needing to earn at least $100K to afford the median priced home in 18 states.

Here is the income it would take to afford a home on a state-by-state basis:

What impacts home affordability?

Let's start by answering that question of what makes a home affordable? The general mortgage affordability rule is to not spend more than 28% of your gross monthly income on home costs — these home costs includes the principal, interest, property taxes and insurance.

Following this 28/36 rule you can take your estimated monthly mortgage payment divide it by 28% to see how much gross monthly income you would need to make. Further multiplying this amount by twelve would give you annual income needed for this home to be considered affordability.

Assumptions used in calculating the income in each state

For this calculation we started with the median home price in each state. The mortgage amount was calculated by applying a 20% down payment to the median home price. A 30-year fixed mortgage rate of 6.08% was used which is the current mortgage rate. Since we used the 30-year fixed mortgage rate — it was fitting to use 30 years as the amortization period. PITI was estimated as $66 for homeowners insurance and 0.07% of the property value for property tax.

Calculation breakdown example

You can start with your monthly mortgage payment from a mortgage calculator — and then follow the below breakdown to convert it to the annual income needed.

Let's use the monthly mortgage payment on the median priced home in the US which gives us a monthly payment amount of $2,324 as a starting point.

You can also see how much home you can afford by using a mortgage affordability calculator.

Read More: Income needed to afford a home in Canada

Income to afford a home in Major US cities

Here is how much income you would need to afford a home in some major cities.

What are the most expensive states to purchase a home in?

California: $192,982

The states that requires the most household income to be considered affordable is California with a household income of $192,982 for the median priced home to be considered affordable.

Hawaii: $184,809

Hawaii is the second most expensive states when it comes to income needed to purchase a home. To afford the median priced home of $783,700 it would take household income of $184,809.

Washington: $152,253

Third on the list is Washington with income of $152,253 required to make the median home price affordable.

States with the least income needed to afford a home

Iowa: $58,744

The least income you would need to afford a median priced home in the US would be $58,744 — which would be to afford the median priced home in Iowa of $240,800.

Oklahoma: $61,298

Oklahoma is the second most affordable state with household income of $61,298 needed to afford the median priced home. Income needed in Oklahoma is $38,291 less than what it would take the purchase the overall median home in the US.

West Virginia: $61,043

To afford a home in West Virginia you would need to have a household income of $61,043. This would allow you to comfortably afford the median priced home.

Where are you still able to afford a home?

With the high cost of homes pair with high interest rates, home affordability is a concern in the US. However, there are still eleven states that are considered affordable when comparing the median income in each state to the monthly mortgage payment based on the 28/36 rule. These are the states and the percentage of monthly median income that would be spent on mortgage payments:

• Pennsylvania - 28.49%
• Oklahoma - 27.62%
• Kansas - 27.02%
• Nebraska - 26.92%
• Missouri - 26.70%
• Michigan - 26.64%
• Indiana - 26.14%4
• Ohio - 25.93%
• North Dakota - 25.53%
• Illinois - 25.34%
• Iowa - 23.03%

Source: NAR