How Much Income You Need to Buy a Home in Every U.S. State: A 2024 Affordability Guide

A new state-by-state analysis reveals that in nearly half of the United States, the typical family of four cannot afford the monthly mortgage on a median-priced, three-bedroom home. The affordability gap is most severe in Hawaii and California, where the recommended income for homeownership exceeds the actual median household income by over 38%. However, significant opportunities remain for budget-conscious families, particularly in the Midwest, where incomes are substantially higher than the required threshold for a median-priced home.

This assessment is based on a recent analysis factoring in a 30-year fixed mortgage rate of 6.65%, property taxes, and insurance, with a 10% down payment. Households spending more than 30% of their gross income on housing are considered cost-burdened, a key metric for assessing affordability.

Which States Are the Least Affordable for Homebuyers?

The analysis identifies a clear affordability crisis in several states, primarily driven by high median home prices that outpace even above-average local incomes.

• Hawaii is the least affordable state. The median price for a three-bedroom home is $796,947, requiring a minimum recommended income of $229,341. This is 41% higher than the state's median four-person household income of $133,656.
• California follows closely. To afford a median-priced home of $728,500, a household needs an income of approximately $209,643—about 38.7% higher than the state's median family income of $128,533.
• Montana and Idaho round out the top four least affordable states. In Montana, the recommended income ($176,513) is over 36% higher than the median ($111,516). In Idaho, the affordability gap is nearly 35%.

The data indicates that high home prices in these states create a significant barrier to entry, even for families with solid earnings.

Where Can Families Still Afford to Buy a Home?

For families seeking affordability, the Midwest offers the most favorable conditions. States in this region boast median household incomes that are significantly higher than the minimum required to purchase a home.

• Ohio ranks as the most affordable state. The median family income of $113,453 is over 51% higher than the recommended income of $74,663 needed for a $259,450 home.
• Michigan, Illinois, and Iowa also present strong opportunities. In these states, typical families earn between 47% and 50% more than the income required to comfortably afford a median-priced, three-bedroom home.

This positive affordability gap means families in these states are less likely to be cost-burdened by housing, allowing for more discretionary spending or savings.

What Factors Determine Home Affordability?

Home affordability is not just about the sale price. It's calculated using several key financial components. The standard model includes:

• Mortgage Principal and Interest: This is the monthly payment toward the loan balance and the interest charged by the lender.
• Property Taxes: Annual taxes levied by local governments based on the property's assessed value.
• Homeowners Insurance: A policy that protects against damage to the property.
• Down Payment: The initial upfront payment. A 10% down payment was used in this analysis, though a 20% down payment is traditional to avoid Private Mortgage Insurance (PMI).

The 28/36 rule is a common guideline for lenders, suggesting that a household should spend no more than 28% of its gross monthly income on housing costs and no more than 36% on total debt obligations.

Key Takeaways for Prospective Homebuyers

Based on the data, location is the most critical factor in home affordability. While coastal and mountain states present significant financial challenges, the Midwest remains a stronghold for attainable homeownership.

Families should prioritize understanding their total debt-to-income ratio and get pre-approved for a mortgage to understand their true budget. Focusing on markets where local incomes comfortably support housing costs can reduce financial strain and provide greater long-term stability.