Map Shows 5 Most and Least Affordable States
The Midwest and South hold the top spots in a list created by the real estate website Zoocasa of the most affordable states in the country to live in this year, where residents don't have to take out a second mortgage to buy a home.
The list ranked states based on their average monthly mortgage payment and how much of a typical household's monthly income would be needed to cover that expense. Zoocasa also looked at the house price-to-income ratio in each state, which shows how affordable homes are in each state for local buyers.
Why It Matters
With mortgage rates continuing to rise and home prices stuck near historical highs across much of the country, prospective homebuyers are facing significant challenges in achieving their goal of owning a home.
He has committed to making housing more affordable by increasing the supply of homes and reducing mortgage rates, but specialists are still waiting to see the specific policies he will introduce and their effects.
Most Affordable States
The states with the lowest cost of living in the country, based on Zoocasa's analysis, are determined by considering the ratio of home prices to income and the percentage of income required for a typical mortgage payment.
1. West Virginia:
House Price-to-Income Ratio: 2.9
Percentage of income required to cover average mortgage payments: 18.7 percent
2. Oklahoma:
Housing affordability metric: the price of a house is 3.0 times the average annual household income.
Typically, nearly one in five people's income goes towards paying off their average mortgage.
3. Mississippi:
Home price-to-income ratio: 3.1
Percentage of Income Needed to Afford Average Mortgage: 20.1 Percent
4. Iowa:
Median home price: about 3.2 times the national median annual household income.
The Average Percentage of Income Required to Pay a Typical Mortgage: 20.6 percent
5. North Dakota:
Housing prices compared to average wages for the area are at a ratio of 3.2.
The average mortgage expense for a household can range from 20.7% of their total income.
According to Zoocasa, West Virginia has the lowest median home price in the country at $163,700, "a major draw for moving to" the state. This greatly helps affordability in the state, where the median household income is also relatively low at $55,948.
The affordability of housing is all about striking a balance between people having the money to pay for homes and homes being affordable to live in," Zoocasa stated. "But what we found is that the five states with the lowest cost of homes compared to people's earnings actually have relatively low incomes for middle-class families, showing just how much a big role that home prices play in making housing affordable.
States with significantly higher median household incomes than the one mentioned do not necessarily have better housing affordability; instead, housing costs may surpass a substantial portion of those wages.
Least Affordable States
It's no surprise to see the U.S.'s least affordable states highlighted by Zoocasa, given their expensive housing markets which are well-known across the country.
1. Hawaii:
Compared to average household income, the price of homes is 10.6 times higher.
Percentage of Income Required for Average Mortgage Payment: 67.9 percent
2. California:
Housing price affordability: 8.9
Percentage of Income Needed to Afford an Average Mortgage: 57.2 percent
3. Montana:
Median house price to median income ratio: 7.7
The average percentage of income required to cover a mortgage: 49.3%.
4. Washington:
Home price-to-income ratio: 6.5
The percentage of household income needed to cover the average mortgage costs: 41.5 percent.
5. Massachusetts
Residential housing costs are approximately 6.4 times the median annual household income.
Percentage of Income Needed to Pay Average Mortgage: 40.8 percent
Hawaii is at the top of the list due to a unique combination of limited land availability, strict home building regulations, high demand from both international and out-of-state buyers, and its remote geographical location, according to Zoocasa. It's the only state with a house price-to-income ratio exceeding 10.
The median price for a home in Hawaii at $1,009,810 is actually higher than in California, which is $852,880. These two states have the most expensive homes in the country, which puts a dent in their relatively high median household incomes.
What People Are Saying
Areas like Arizona, Idaho, and certain areas in Texas, which experienced rapid growth and significant home price appreciation following the pandemic, may now see more subdued growth or even home price declines.
Despite home prices remaining high and mortgage rates predicted to stay above 6 percent through 2025, the coming year is expected to bring more homes available for sale—a silver lining for prospective buyers, whose options may differ depending on the location they're in.
What Happens Next
Although at a slower pace than previously recorded, partly due to waning demand. In states like Florida and Texas, which have built the most new homes in recent years, a large inventory of properties is expected to give homebuyers an edge.
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