The government suggests homeowners should spend 30% or less of income on housing. But data shows that this is a fantasy for nearly half of the country.
As Americans look for ways to trim costs that have been rising for over a year, many will notice that one line item consistently takes up the largest share of their budget: housing. For decades, policymakers have said that those who spend 30% or more of their pre-tax income on housing are considered housing cost-burdened. The reasoning is that someone who spends too much on housing will have less money for other priorities such as food, transportation, education, or savings.
Today’s Homeowner wanted to better understand the state of housing across the country. We looked at data from the U.S. Census Bureau, Zillow, and Freddie Mac to calculate the share of income spent on mortgage payments for every state, giving us a unique look at how affordable each state is for homeowners and insight into where you can still own a home while living within the government’s financial guardrails. For more details on our data and sources, check out the Methodology section below.
Key Takeaways
Nationally, homeowners spent an average of 28.4% of their pre-tax income on mortgage payments.
Homeowners in 21 states and Washington, D.C., spent more than 30% of their median household income on mortgage payments.
The national median monthly pre-tax household income was $5,547, the median monthly mortgage payment was $1,624, and the median national home price was $333,187.
States where homeowners spent the lowest share of their income on mortgage payments were West Virginia, Iowa, and Kansas (16.6%, 17.7%, and 19.5%, respectively).
States where homeowners spent the greatest share of income on their mortgages were Hawaii, California, and Washington, D.C. (62.3%, 53.2%, and 43.9%, respectively).
The Midwest was considered the most affordable region, where residents spent only 22% of their income on mortgage payments. The South was next at 28%, followed by the Northeast at 30%. The West was quite an outlier, where residents spent 41% of their income on mortgage payments.
Hawaii, California, and Washington, D.C. had the three highest median home prices at $903,000, $772,000, and $676,000.
Meanwhile, West Virginia, Mississippi, and Arkansas had the lowest median home prices at $144,000, $171,000, and $187,000. West Virginia also had the lowest median mortgage payment at only $700 a month.
Top 10 Most Affordable States to Buy a Home
If homeownership is your top priority, you may want to consider moving to one of these ten states.
West Virginia’s rock-bottom average mortgage payments of about $700 help make it the most affordable state to own a house. West Virginians likely spend so little on their mortgages because their homes are on average the least expensive in the country. The average home in West Virginia costs under $145,000, less than one-half of the $333,000 national median home price.
- Share of income spent on mortgage: 16.5%
- Median monthly household income: $4,271
- Median monthly mortgage payment: $707
- Median home price: $144,985
Iowa had the fifth-lowest monthly mortgage payment among all states. However, it also had relatively high income levels compared to other highly affordable states. Its median monthly household income of almost $5,500 was just under the national average. The state’s competitive incomes, low mortgages, and inexpensive homes make it an attractive option for those eyeing affordability.
- Share of income spent on mortgage: 17.7%
- Median monthly household income: $5,467
- Median monthly mortgage payment: $968
- Median home price: $198,702
Although Kansas has a slightly lower median monthly income than Iowa, Kansans spend a greater share of their income on mortgages than Iowans. This is driven by a slightly smaller median income and slightly higher monthly mortgage payments. On top of that, average home prices are higher than in Iowa.
- Share of income spent on mortgage: 19.5%
- Median monthly household income: $5,344
- Median monthly mortgage payment: $1,043
- Median home price: $214,096
Oklahoma households spend almost the same percentage of their income on mortgage payments as Kansans. Monthly mortgage payments are lower, likely in part because the median home price is lower in Oklahoma. However, the average household income is almost $700 less per month than in Kansas.
- Share of income spent on mortgage: 19.7%
- Median monthly household income: $4,652
- Median monthly mortgage payment: $917
- Median home price: $188,097
Ohio is the first state on this list to spend more than one-fifth of its income on mortgage payments. The state has relatively high monthly mortgage payments compared to other affordable states, while the median home price is also higher than some of its peers.
- Share of income spent on mortgage: 20.2%
- Median monthly household income: $5,189
- Median monthly mortgage payment: $1,050
- Median home price: $215,472
Mississippi has the lowest median household income of any state, which may put downward pressure on home and other prices. In fact, it also has the second-lowest median home price as well as the second-lowest monthly mortgage payments. All of these factors make it an affordable state to own a home.
- Share of income spent on mortgage: 20.6%
- Median monthly household income: $4,060
- Median monthly mortgage payment: $836
- Median home price: $171,467
Arkansas has the fourth-lowest monthly household income at around $4,300. It also has the third-lowest median home price and the third-lowest mortgage payments at less than $950 a month.
- Share of income spent on mortgage: 20.9%
- Median monthly household income: $4,377
- Median monthly mortgage payment: $916
- Median home price: $187,963
While Indiana homeowners earn more than many states on this list, their median household income is still just below the national average of around $5,500. In addition, they have the second-most expensive homes of any of these affordable states, with the median home selling for over $226,000.
- Share of income spent on mortgage: 21.1%
- Median monthly household income: $5,229
- Median monthly mortgage payment: $1,103
- Median home price: $226,287
Illinois stands out from many of these states in several ways. It’s much larger, with the sixth-largest population in the country (Ohio is seventh). It’s also the most expensive state to buy a house in, beating out Indiana by some $37,000 in median home prices. And it the affordable state with the top earners, with median household income over $6,000 a month (the runner-up is Iowa).
- Share of income spent on mortgage: 21.4%
- Median monthly household income: $6,017
- Median monthly mortgage payment: $1,286
- Median home price: $263,855
Although at the bottom of this list, Kentucky is still a very affordable state for homeowners. Residents here pay a smaller percentage of their income on mortgages than the residents of 40 other states. Households in Kentucky also pay less than the national average for home prices. However, they earn less than the national average household income.
- Share of income spent on mortgage: 21.6%
- Median monthly household income: $4,631
- Median monthly mortgage payment: $1,000
- Median home price: $205,111
Access to Affordable Housing Is Better in the South and Midwest
The 30% financial guideline became popular decades ago, when the primary motivation was to increase affordability for the very poor. It actually comes from an amendment to the landmark 1968 Fair Housing Act, which prohibited discriminatory lending practices meant to keep minorities and poor people out of certain neighborhoods.
In 1969, Senator Edward Brooke, a Black Republican and fair housing advocate, pushed for what became known as the “Brooke Amendment,” which was passed as a response to rent increases and complaints about public housing. That year, public housing rent was capped at 25% of a resident’s income. Congress increased the cap to 30% in 1981.
While there are reasons to keep housing expenditures low enough not to overburden your budget, the number itself can vary from situation to situation. Nevertheless, financial advisors and government policymakers still refer to the 30% rule as a good starting point when determining how much one should spend on housing.
The cost of moving isn't cheap, but it may be a worthy investment to move to the South or Midwest if homeownership is valuable to you.
The West Stands Out As the Least Affordable Region To Buy a Home
Compared to the shares of income spent on housing by Midwestern and Southern households, the Western states seem like an entirely different world. In Hawaii, the least affordable state in which to pay a mortgage, the average mortgage payment makes up 62.3% of the median household income. That is nearly four times as much as in West Virginia. And the median home price is equally shocking, at over $903,000.
There are many reasons why Hawaii is so expensive, but chief among them is that it’s an island. Nearly everything, including building supplies, has to be shipped there or flown in, adding to the cost of living. Its tropical climate also makes it a desirable place for foreign investors to buy property, which drives up housing costs.
But even Western states that were not as isolated or idyllic as Hawaii found themselves on the least affordable end of our ranking. In fact, all the top 10 least affordable states were in the West, except Washington, D.C.. The Census classifies Washington, D.C. as a Southern state, making it the least affordable Southern state. Residents of the nation’s capital spent just shy of 44% of their income on mortgages, making it the third-least affordable state.
The rest of the states rounding out the top 10 were Montana, Washington, Oregon, Utah, Idaho, Colorado, and Nevada, with residents spending anywhere from almost 43% of their income down to under 40% on mortgages.
Part of the explanation lies in the region’s high home prices. Seven of the 10 most expensive median home prices were in the West. Interestingly, state income did not seem to correlate strongly with the West’s penchant for spending so much of their earnings on their homes.
The states with the highest median household incomes tended to be in the Northeast, led by Maryland, Washington, D.C., Massachusetts, New Jersey, and New Hampshire, all hovering around $90,000 a year. California follows at the No. 6 spot with a median household income of about $85,000.
Methodology
To determine how affordable it is to buy a home in every state, Today’s Homeowner compared two metrics:
- Median monthly mortgage payment. We assumed a 30-year, fixed-rate mortgage at an interest rate of 6.15% (the current figure from Freddie Mac as of the week of January 19, 2023). Using that rate and median home prices from Zillow, we calculated the median monthly mortgage payment.
- Median monthly pre-tax household income. Data comes from the U.S. Census Bureau’s 2021 1-year American Community Survey.
To calculate the average share of income spent on a mortgage, we divided the median monthly mortgage payment by the median monthly pre-tax household income. States were ranked accordingly.
