AFFORDABLE HOUSING CRISIS SIGNALED BY NEARLY HALF OF THE COUNTRY SPENDING TOO MUCH ON MORTGAGE PAYMENTS

from Today’s Homeowner, February, 2023 (excerpts)

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.

• Percent of Income Spent on Mortgage: 62.3%
• Median Home Price: $903,318
• Median Monthly Income: $7,071 Monthly Mortgage Payment: $4,403

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....

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. …

read … Full Report

KHON: STUDY: The housing affordability crisis in Hawaii