The 2008 housing collapse was real. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2012. Now ten years later, in most parts of the country the housing market has recovered. We’ve moved beyond pre-recession levels and some analysts are are actually starting to worry about yet another housing bubble. Real estate prices are on the rise, thanks in large part to limited housing inventory. Prices have increased and folks are worried about how much income they need to afford the average home.
A lot has to do with where you live. Howmuch took a closer look at the salary you need to afford the average home in your state.
The average cost of a home is dramatically different from state to state. Typically the states on the coasts tend to have the highest real estate costs, while interior states have more affordable housing options.
Top Five Places Where You Need the Highest Salaries to Afford the Average Home
1. Hawaii: $153,520 for a house worth $610,000
2. Washington, DC: $138,440 for a house worth $549,000
3. California: $120,120 for a house worth $499,900
4. Massachusetts: $101,320 for a house worth $419,900
5. Colorado: $100,200 for a house worth $415,000
Top Five Places Where You Need the Lowest Salaries to Afford the Average Home
1. West Virginia: $38,320 for a house worth $149,500
2. Ohio: $38,400 for a house worth $149,900
3. Michigan: $40,800 for a house worth $160,000
4. Arkansas: $41,040 for a house worth $161,000
5. Missouri: $42,200 for a house worth $165,900
How average home prices were calculated
HowMuch collected average home prices for every state from Zillow which was then plugged into a mortgage calculator to figure out monthly payments. Mortgage payments consist of both the principal and the interest for the loan. The interest rate varied from 4% to 5% in each state, depending on the market. Assumed buyers could contribute a 10% down payment. Financial advisors recommend the total cost of housing take up no more than 30% of gross income (the amount before taxes, retirement savings, etc.). Using this rule as our benchmark, the minimum salary required to afford the average home in each state was calculated.