Real Estate 2024: Here’s the Income You Need To Afford a $500K Home in Every State
If you want to enter the real estate market, you’ve probably already looked into the calculations to determine how much you would need to save up for a 20% down payment and what your monthly payments would be. Before you apply for a mortgage, you want to ensure that you have the income and savings required to purchase a home to ensure you can afford to become a homeowner. We will break down the current real estate market and determine the income needed to afford a $500,000 home in every state.
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When interest rates dropped during the pandemic, home prices skyrocketed as many used this as an opportunity to enter the real estate market. However, the current real estate market is drastically different from the scenario in 2020.
According to the National Association of Realtors (NAR), existing home sales went up 3.1% in January from December 2023, but sales are down 1.7% from one year ago. The median sale price for the country was at $379,100, which is a record high for January and an increase of 5.1% from just one year ago. First-time homebuyers made up 28% of sales in January, which is a drop from 29% in December.
Inventory for January was at a three-month supply, which means we’re currently in a seller’s market. The low inventory is an issue for potential buyers nationwide because a supply of five to six months is needed for a balanced market.
As of January, about 89% of those with a mortgage have a rate that’s lower than 6%, according to Redfin. This means that most homeowners are paying less than the current mortgage rate, which means they’re not likely to sell because they may not want to purchase another home with a higher interest rate. This impacts the housing market since inventory is lower than normal, and the supply issues keep housing prices high. Those looking to enter the real estate market are struggling because they either can’t find the home they want or save up enough for a down payment.
With the aggressive rate hike campaign from the Federal Reserve in an attempt to cool down soaring inflation, home ownership has become more expensive. The combination of higher mortgage payments and limited inventory is causing frustrations.
While it’s difficult to predict what will happen to the market in 2024, many experts are waiting to see if the Fed will drop rates to make mortgage payments more affordable. If the rates drop significantly in 2024, there’s a chance that more homeowners would be willing to sell, which would address the supply issues.
To determine the income you need to afford a $500,000 home in every state, GOBankingRates compiled data. We will break down the income you need to afford a $500,000 home in every state, along with your monthly mortgage.
Alabama
Mortgage: $2,801
Minimum income needed for 20% down payment: $112,043
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Alaska
Mortgage: $3,068
Minimum income needed for 20% down payment: $122,709
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Arizona
Mortgage: $2,897
Minimum income needed for 20% down payment: $115,876
Arkansas
Mortgage: $2,901
Minimum income needed for 20% down payment: $116,043
California
Mortgage: $2,947
Minimum income needed for 20% down payment: $117,876
Colorado
Mortgage: $2,864
Minimum income needed for 20% down payment: $114,543
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Connecticut
Mortgage: $3,380
Minimum income needed for 20% down payment: $135,209
Delaware
Mortgage: $2,889
Minimum income needed for 20% down payment: $115,543
Florida
Mortgage: $3,014
Minimum income needed for 20% down payment: $120,543
Georgia
Mortgage: $3,018
Minimum income needed for 20% down payment: $120,709
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Hawaii
Mortgage: $2,768
Minimum income needed for 20% down payment: $110,709
Idaho
Mortgage: $2,914
Minimum income needed for 20% down payment: $116,543
Illinois
Mortgage: $3,501
Minimum income needed for 20% down payment: $140,043
Indiana
Mortgage: $2,984
Minimum income needed for 20% down payment: $119,376
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Iowa
Mortgage: $3,268
Minimum income needed for 20% down payment: $130,709
Kansas
Mortgage: $3,193
Minimum income needed for 20% down payment: $127,709
Kentucky
Mortgage: $2,980
Minimum income needed for 20% down payment: $119,209
Louisiana
Mortgage: $2,867
Minimum income needed for 20% down payment: $114,709
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Maine
Mortgage: $3,151
Minimum income needed for 20% down payment: $126,043
Maryland
Mortgage: $3,072
Minimum income needed for 20% down payment: $122,876
Massachusetts
Mortgage: $3,109
Minimum income needed for 20% down payment: $124,376
Michigan
Mortgage: $3,209
Minimum income needed for 20% down payment: $128,376
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Minnesota
Mortgage: $3,097
Minimum income needed for 20% down payment: $123,876
Mississippi
Mortgage: $2,914
Minimum income needed for 20% down payment: $116,543
Missouri
Mortgage: $3,055
Minimum income needed for 20% down payment: $122,209
Montana
Mortgage: $2,943
Minimum income needed for 20% down payment: $117,709
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Nebraska
Mortgage: $3,314
Minimum income needed for 20% down payment: $132,543
Nevada
Mortgage: $2,880
Minimum income needed for 20% down payment: $115,209
New Hampshire
Mortgage: $3,439
Minimum income needed for 20% down payment: $137,543
New Jersey
Mortgage: $3,564
Minimum income needed for 20% down payment: $142,543
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New Mexico
Mortgage: $2,914
Minimum income needed for 20% down payment: $116,543
New York
Mortgage: $3,218
Minimum income needed for 20% down payment: $128,709
North Carolina
Mortgage: $2,976
Minimum income needed for 20% down payment: $119,043
North Dakota
Mortgage: $3,043
Minimum income needed for 20% down payment: $121,709
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Ohio
Mortgage: $3,927
Minimum income needed for 20% down payment: $131,876
Oklahoma
Mortgage: $3,005
Minimum income needed for 20% down payment: $120,209
Oregon
Mortgage: $3,022
Minimum income needed for 20% down payment: $120,876
Pennsylvania
Mortgage: $3,255
Minimum income needed for 20% down payment: $130,209
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Rhode Island
Mortgage: $3,218
Minimum income needed for 20% down payment: $128,709
South Carolina
Mortgage: $2,872
Minimum income needed for 20% down payment: $114,876
South Dakota
Mortgage: $3,122
Minimum income needed for 20% down payment: $124,876
Tennessee
Mortgage: $2,914
Minimum income needed for 20% down payment: $116,543
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Texas
Mortgage: $3,334
Minimum income needed for 20% down payment: $133,876
Utah
Mortgage: $2,872
Minimum income needed for 20% down payment: $114,876
Vermont
Mortgage: $3,397
Minimum income needed for 20% down payment: $113,876
Virginia
Mortgage: $2,997
Minimum income needed for 20% down payment: $119,876
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Washington
Mortgage: $2,997
Minimum income needed for 20% down payment: $119,876
West Virginia
Mortgage: $2,872
Minimum income needed for 20% down payment: $114,876
Wisconsin
Mortgage: $3,305
Minimum income needed for 20% down payment: $132,209
Wyoming
Mortgage: $2,868
Minimum income needed for 20% down payment: $114,709
Methodology: To find How Much Income Do You Need To Buy a $500K Home in every state, GoBankingRates found the National 30-year Fixed Rate for a mortgage sourced from Federal Reserve Economic Research (6.90%). The property taxes for each state were also collected and sourced from the Tax Foundation. Then GOBankingRates calculated the annual mortgage cost if someone put a 5% downpayment, 10% downpayment, 15% downpayment, and 20% downpayment on a $500,000 home mortgage. Using the property tax as well as the calculated mortgage options, a yearly cost can be estimated for each state. Most financial experts suggest that your housing costs should not be over 30% of your salary, so GOBankingRates calculated the income required to pay for a $500k home mortgage assuming the yearly mortgage costs are no more than 30% of expenses. All data was collected and is up to date as of April 1, 2024.
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This article originally appeared on GOBankingRates.com: Real Estate 2024: Here’s the Income You Need To Afford a $500K Home in Every State
