Looking to buy a home this year, but feel like your salary can't keep up? Well, you're not alone.
According to a recent report from Bankrate, Americans need an income of $110,871 annually to afford a median-priced home of $402,343. This is a 46% increase from the start of 2020, with residents in 22 states and the District of Columbia now needing to earn at least $100,000 annually to afford a median-priced home in their area.
"Affordability is the biggest issue — finding a home that's in your budget," Bankrate housing market analyst Jeff Ostrowski said in the report. "The higher the price of a home, the harder it is to come up with the down payment or to qualify for the monthly payment. Home values are near record highs, and if you want a house, you have little choice but to pay a high price."
How much do New Jersey residents need to make?
In New Jersey, residents need to make $152,186 annually to afford the state's median-priced home of $495,600. This is a 45% increase from 2020, when the annual income needed to afford a median-priced home was $104,986.
Due to high mortgage rates and increased home prices, new homeowners in New Jersey are paying about $3,551 monthly for their mortgage. This falls in line with the report's finding that Western and Northeastern states require the most income for aspiring homeowners to afford a median-priced home.
Where has the annual income increased the most?
Montana saw the greatest rise in the annual income needed to buy a median-priced home in the country. With a 77.7% increase from 2020, aspiring homeowners in the state must make $131,357 annually to afford a home worth $507,000.
Utah and Tennessee saw similar increases, at 70.3% and 70.1%, respectively. In Utah, residents must make $133,886 to afford a home worth $525,500, while residents in Tennessee must make $94,371 to afford a home worth $365,600.
South Carolina and Arizona saw the fourth- and fifth-highest increases in annual income from 2020, at 67.3% and 65.3%, respectively.
Where has the annual income increased the least?
In contrast, the annual income needed to buy a median-priced home in some states increased by a much smaller percentage.
The annual income needed to buy a median-priced home of $259,200 in North Dakota is $73,414 — an increase of just 9.2% from the $67,224 annual salary that was needed in 2020. In the District of Columbia, an aspiring homeowner must make $167,871 annually to afford a home worth $612,500 — a 24.6% increase from the annual salary needed in 2020.
Louisiana (+24.9%), Illinois (+27.2%) and Kansas (+29.3%) rounded out the five states with the lowest increase in annual income needed to buy a home.
What states require the highest annual salaries?
Of all 50 states and the District of Columbia, California requires the highest annual salary to afford a typical home. In California, aspiring homeowners must make $197,057 to afford a home worth $739,200.
Hawaii is a close second, requiring a $185,829 annual salary to afford a typical home worth $735,900. The District of Columbia ($167,871), Massachusetts ($162,471) and Washington ($156,814) made up the remaining five with the highest annual income needed for aspiring homeowners.
"Homeownership doesn't necessarily need to be your be-all and end-all goal. It can be one way to secure your finances and build for your future, but it's not the only way. In the short run, become more cognizant of your plans for saving to reach your financial goals," Daryl Fairweather, chief economist at Redfin, said in the report.
"One of the benefits of renting is that it allows for more flexibility. That means it’ll be easier for you to take a new job in a new city or put yourself on a better financial path if you don’t tie yourself down. It might be a blessing in disguise because you have more flexibility to get yourself on a path where you can attain homeownership,” Fairweather said.
Here's how much annual income is required to buy a median-priced home in all 50 states and the District of Columbia:
Maddie McGay is the real estate reporter forNorthJersey.comand The Record, covering all things worth celebrating about living in North Jersey. Find her onInstagram @maddiemcgay,onX @maddiemcgayy, and sign up for herNorth Jersey Livingnewsletter.Do you have a tip, trend or terrific house she should know about? Email her at[email protected].
