Most people don't earn six figures, but it's become the new benchmark for whether or not you can afford a typical U.S. home.
Americans need to earn an annual income of $110,871 to buy a median-priced home of $402,343 — a 46% increase since January 2020, according to a new Bankrate analysis of Redfin sales data.
To calculate homeownership costs, Bankrate assumes a 20% down payment, no HOA fees or mortgage insurance and a 30-year fixed mortgage interest rate of 7.05%.
In contrast to the six figures needed now, in 2020, an annual income of $76,191 was sufficient to afford a median-priced home. For context, households currently earn a median income of $74,580, according to the most recent U.S. Census Bureau data available.
This suggests that homeownership has been put further out of reach for most middle class buyers over the past four years.
The decrease in affordability reflects the steady rise in homeownership costs: Median home prices have risen 27% since 2020 and mortgage rates have nearly doubled in that time.
As a result, the number of places where you need to earn $100,000 or more to afford a median-priced home has climbed from seven to 23 since January 2020. Here's a look at the salary required in those areas:
- California: $197,057
- Hawaii: $185,829
- District of Columbia: $167,871
- Massachusetts: $162,471
- Washington: $156,814
- Colorado: $152,229
- New Jersey: $152,186
- New York: $148,286
- Utah: $133,886
- Rhode Island: $132,343
- Montana: $131,357
- New Hampshire: $130,329
- Oregon: $129,129
- Connecticut: $119,614
- Florida: $114,771
- Vermont: $114,471
- Idaho: $114,386
- Nevada: $111,557
- Arizona: $110,271
- Maryland: $108,257
- Virginia: $106,971
- Maine: $102,557
- Texas: $100,629
Four years ago, only states and districts with the highest housing costs in the country required a six-figure salary to afford a typical home. This includes California, Hawaii, Massachusetts and New York — states with the highest percentage of homeowners spending more than 30% of their gross income on housing, according to a 2023 LendingTree study.
However, as home prices continue to rise, more states have become unaffordable for the average wage earner.
This includes migration hotspots that were popular during the height of the pandemic due to their relatively low prices, including Utah, Montana and Idaho. The value these markets once offered has since been offset by a rapid rise in home prices. In Montana, the income needed to buy a median-priced home increased 77% since 2020 — the largest jump of all states.
Wage gains have not kept up with home prices, either. Wages grew 23% from the last quarter of 2019 through November 2023, according to a Center for American Progress analysis of Bureau of Labor Statistics data. This has squeezed out potential homebuyers that could have afforded to buy a home in 2020.
That said, homes are still affordable in 14 states if you earn less than $75,000. Almost all of these states are in the Midwest or South and include Mississippi, Ohio, Arkansas, Indiana, Kentucky, Iowa and Oklahoma as the least expensive places to buy a home.
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