Due to the current market, the difficulty of becoming a homeowner has become a popular headline. While demand outweighing supply was a feature of much of 2020 and 2021, the rising interest rates recently are boxing out potential buyers.
That said, buying and selling homes is a part of life, and whether you are looking to buy your first home or change your current living situation, finding the right home ultimately comes down to budget and income. A popular standard since the 1980s has been the “30% Rule” which simply states that no more than 30% of your gross income should be spent on housing costs.
In a recent analysis by GOBankingRates, the financial service broke out the minimum salary needed in every state in order to afford the “average” home. For this report, GOBankingRates followed the 30% Rule, found the average home price in 2021 using Zillow, and factored the mortgage cost by assuming a 30-year fixed loan with a 20% down payment and interest rate of 6.29%. The full methodology is available at the end of their report. Here’s what they found:
Alabama: $64,222
- Average home value: $201,656
- Monthly mortgage payment: $1,059.68
Alaska: $102,513
- Average home value: $332,437
- Monthly mortgage payment: $1,915.91
Arizona: $98,929
- Average home value: $441,026
- Monthly mortgage payment: $2,402.08
Arkansas: $60,151
- Average home value: $174,123
- Monthly mortgage payment: $949.82
California: $153,805
- Average home value: $785,652
- Monthly mortgage payment: $4,344.58
Colorado: $114,889
- Average home value: $490,848
- Monthly mortgage payment: $3,145.02
Connecticut: $102,703
- Average home value: $372,658
- Monthly mortgage payment: $2,380.62
Delaware: $88,663
- Average home value: $347,728
- Monthly mortgage payment: $1,891.03
Florida: $95,717
- Average home value: $397,367
- Monthly mortgage payment: $2,250.38
Georgia: $79,932
- Average home value: $308,459
- Monthly mortgage payment: $1,749.44
Hawaii: $181,266
- Average home value: $1,012,084
- Monthly mortgage payment: $5,267.80
Idaho: $101,664
- Average home value: $468,187
- Monthly mortgage payment: $2,569.52
Illinois: $82,274
- Average home value: $262,698
- Monthly mortgage payment: $1,730.71
Indiana: $68,527
- Average home value: $216,473
- Monthly mortgage payment: $1,216.92
Iowa: $68,353
- Average home value: $190,046
- Monthly mortgage payment: $1,166.55
Kansas: $69,582
- Average home value: $203,630
- Monthly mortgage payment: $1,224.47
Kentucky: $66,147
- Average home value: $194,198
- Monthly mortgage payment: $1,086.84
Louisiana: $66,987
- Average home value: $210,980
- Monthly mortgage payment: $1,133.29
Maine: $94,248
- Average home value: $351,259
- Monthly mortgage payment: $2,088.79
Maryland: $98,650
- Average home value: $407,849
- Monthly mortgage payment: $2,360.73
Massachusetts: $131,904
- Average home value: $593,274
- Monthly mortgage payment: $3,468.61
Michigan: $73,093
- Average home value: $228,841
- Monthly mortgage payment: $1,381.80
Minnesota: $88,607
- Average home value: $332,282
- Monthly mortgage payment: $1,934.40
Mississippi: $60,159
- Average home value: $162,815
- Monthly mortgage payment: $890.85
Missouri: $69,528
- Average home value: $225,808
- Monthly mortgage payment: $1,297.62
Montana: $98,610
- Average home value: $436,375
- Monthly mortgage payment: $2,427.65
Nebraska: $74,544
- Average home value: $235,764
- Monthly mortgage payment: $1,468.79
Nevada: $103,420
- Average home value: $466,756
- Monthly mortgage payment: $2,526.66
New Hampshire: $115,167
- Average home value: $440,717
- Monthly mortgage payment: $2,874.16
New Jersey: $118,727
- Average home value: $467,759
- Monthly mortgage payment: $3,144.07
New Mexico: $77,936
- Average home value: $288,250
- Monthly mortgage payment: $1,567.57
New York: $97,524
- Average home value: $367,223
- Monthly mortgage payment: $2,214.32
North Carolina: $82,239
- Average home value: $310,569
- Monthly mortgage payment: $1,738.12
North Dakota: $79,735
- Average home value: $277,872
- Monthly mortgage payment: $1,578.28
Ohio: $70,941
- Average home value: $208,655
- Monthly mortgage payment: $1,296.42
Oklahoma: $62,647
- Average home value: $177,979
- Monthly mortgage payment: $1,003.49
Oregon: $117,544
- Average home value: $519,395
- Monthly mortgage payment: $2,963.10
Pennsylvania: $81,125
- Average home value: $262,698
- Monthly mortgage payment: $1,612.50
Rhode Island: $108,176
- Average home value: $432,324
- Monthly mortgage payment: $2,632.09
South Carolina: $77,599
- Average home value: $283,988
- Monthly mortgage payment: $1,530.19
South Dakota: $79,878
- Average home value: $287,137
- Monthly mortgage payment: $1,693.12
Tennessee: $75,930
- Average home value: $289,085
- Monthly mortgage payment: $1,581.75
Texas: $84,601
- Average home value: $303,546
- Monthly mortgage payment: $1,906.24
Utah: $114,938
- Average home value: $570,266
- Monthly mortgage payment: $3,086.99
Vermont: $101,295
- Average home value: $352,648
- Monthly mortgage payment: $2,261.62
Virginia: $91,220
- Average home value: $372,792
- Monthly mortgage payment: $2,104.99
Washington: $128,641
- Average home value: $619,223
- Monthly mortgage payment: $3,496.48
West Virginia: $59,660
- Average home value: $136,981
- Monthly mortgage payment: $738.09
Wisconsin: $80,943
- Average home value: $260,805
- Monthly mortgage payment: $1,622.62
Wyoming: $80,082
- Average home value: $315,824
- Monthly mortgage payment: $1,696.47
Given the mean salary in the U.S. is around $54,000 per year according to the Bureau of Labor Statistics, these are some alarming numbers. For single-person households, even in the cheapest state of Arkansas, the minimum salary needed for an average home exceeds the median wages of American workers.
More often than not, home buyers also have expenses that are not included in monthly living expenses. As such, when crunching numbers, you need to include extra expenses such as student loan debt or other monthly expenditures that are not included in the data. Additionally, housing costs are more than just a mortgage: taxes, home repairs, and insurance should all factor in if you’re shooting for the 30% Rule.
That said, there are financing options available that can allow those on the lower end of the earning scale the ability to purchase a home. Talking to a financial expert and looking at your unique budgeting needs is always the first step in prepping for any major purchase.
