Massachusetts residents looking to become homeowners need the highest annual income of any state in the country to achieve that dream, according to a new analysis by Realtor.com.
Massachusetts is the third least affordable place for the typical household to buy a median-priced home, according to Realtor.com’s Aug. 1 report.
The rankings are based off an analysis that compared the minimum recommended household annual income to afford a median-priced home in the state with the actual state median income. The minimum recommended income was calculated by using the “30% rule,” or that a household should not spend more than 30% of its gross monthly income on housing costs.
The affordability gap was calculated by subtracting the actual annual income from the minimum recommended income to afford a median-priced home and dividing it by the actual income.
The analysis of July data found that affordability gaps ranged from 0.6% to 138%, with Massachusetts near the top at 114%.
How much do you need to earn in Massachusetts to buy a home?
According to Realtor.com’s analysis, Massachusetts homebuyers need to earn $210,074 a year to comfortably afford the median list price in the state of $797,000.
It was the highest minimum required income and median list price in the U.S. as of July.
But the actual median income in the state, according to the report, is $98,170: about $112,000, or 114%, less than the income needed to afford a house in Massachusetts.
That ranks it third on the list of least affordable states.
In which states do buyers need the highest incomes to purchase a home?
Montana is the least affordable place to buy a home, according to the analysis.
The median household income needed to buy a home in Montana is $171,301 as the median home price is $649,900. However, the median income is $72,066 – about 138% less than the minimum recommended income.
"Montana’s housing market has grown expensive due to an influx of out-of-state buyers, especially during and after the [COVID-19] pandemic, seeking remote work-friendly, scenic, and less densely populated areas," said Realtor.com senior economic research analyst Hannah Jones.
The only other state less affordable than Massachusetts is New York, where residents must make $210,074 to afford the median home price of $797,000 – exceeding the actual median income by $111,904.
Here are the least affordable states to buy a home, according to Realtor.com.
Place | State | Median home list price | Median household income recommended |
1 | Montana | $649,900 | $171,301 |
2 | New York | $671,500 | $176,994 |
3 | Massachusetts | $797,000 | $210,074 |
4 | Hawaii | $761,000 | $200,585 |
5 | California | $750,000 | $197,685 |
6 | Idaho | $599,450 | $158,003 |
7 | Oregon | $577,000 | $152,086 |
8 | Rhode Island | $599,450 | $158,003 |
9 | Washington | $659,475 | $173,825 |
10 | Nevada | $499,450 | $131,645 |
In which states do buyers need the lowest incomes to buy a home?
If you’re looking for affordability, try the Midwest. Iowa, Illinois and Kansas are the three most affordable states in this category.
"Located in the highly affordable Midwest, Iowa boasts incomes that are roughly in line with home prices," says Jones. "In fact, all five of the most affordable states are located in the Midwest, shedding some light on the recent popularity of the region."
In Iowa, the median household income is $75,999, just $430 or 0.57% less than the recommended amount to purchase a home with the median list price of $290,000. That home price was about $150,000 below the national median in July.
Here are the most affordable states to buy a home, according to Realtor.com.
Place | State | Median home price | Median household income recommended |
1 | Iowa | $289,938 | $76,422 |
2 | Illinois | $323,225 | $85,196 |
3 | Kansas | $301,126 | $79,371 |
4 | Ohio | $289,950 | $76,425 |
5 | Indiana | $309,450 | $81,565 |
6 | Pennsylvania | $324,995 | $85,662 |
7 | Missouri | $311,000 | $81,973 |
8 | West Virginia | $270,000 | $71,167 |
9 | Minnesota | $399,000 | $105,169 |
10 | Michigan | $316,950 | $83,542 |
About how much money do you need to earn to buy home in each New England state?
According to the study, you need:
Connecticut: $145,000
Maine: $128,000
Massachusetts: $210,000
New Hampshire: $158,000
Rhode Island: $158,000
Vermont: $138,000
This article originally appeared on Telegram & Gazette: Looking to buy a home in MA? Here's how much you'll need to make.
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