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Study Shows Buyers Need Six-Figure Income for Homes in Half of U.S. States

Study Shows Buyers Need Six-Figure Income for Homes in Half of U.S. States

A recent study reveals that buyers now need a substantial six-figure income to afford a home in almost half of the states in the country. According to Bankrate analyst Jeff Ostrowski, the housing market is not expected to improve in the near future, with no signs of relief in housing supply or mortgage rates.

Ostrowski cautioned that conditions are unlikely to improve over the coming months and advised buyers who need or want to move to do so. Home prices have remained steady in most parts of the country, and there is little indication of a price correction on the horizon.

One of the reasons for this stagnant market is the “lock-in effect,” where homeowners are reluctant to sell due to the disparity between their current low mortgage rates and the higher rates for new mortgages. Despite expectations for lower mortgage rates, rates have remained high, with the current rate for a 30-year fixed mortgage at 6.79%.

Bankrate’s analysis shows that Americans now need an annual income of at least $100,000 to afford homes in 22 states and the District of Columbia. This is a significant increase from just four years ago when only six states and D.C. required a six-figure salary. In states like California, Hawaii, D.C., Massachusetts, and Washington, the required income is even higher, ranging from $156,814 to $197,057.

States where the income needed to afford a typical home has risen the most since 2020 include Montana, Utah, and Tennessee, which have seen increases of 77.7%, 70.3%, and 70.1%, respectively. This trend is reflected in other states as well, with South Carolina and Arizona seeing significant rises of 67.3% and 65.3%, respectively.

Despite rising incomes, the issue remains that they are not keeping pace with the rate of starter-home costs. While a typical American household earned an estimated $84,072 as of February, the income needed to purchase a starter home jumped 8.2% from a year earlier, highlighting the growing affordability gap in the housing market.

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