The share of income spent on homeownership varies widely across different U.S. states, but the biggest burden is felt in Hawaii, new data from online lending marketplace LendingTree reveals.
LendingTree found the percentage of households that spend more than 30% of their income on housing in all 50 U.S. states using data from the U.S. Census Bureau. It compared median income in each state to housing costs, which included mortgages, taxes, insurance, utilities and HOA fees.
The analysis used 30% since it's a common benchmark for housing costs in a monthly budget. Known as the "30% rule," financial planners typically recommend putting no more than 30% of household income toward housing costs.
In theory, this helps leave room for other essentials, such as health care, groceries or transportation. It can also act as a buffer in case your monthly costs rise unexpectedly.
Hawaii ranked first on the list, likely due to the state's notoriously high cost of living. The median list price for homes there is $852,500, according to Realtor.com data.
Below are the 10 states where the highest percentage of homeowners spend more than 30% of their gross income on housing:
- Hawaii: 31.8%
- California: 29.7%
- New Jersey: 28.5%
- Rhode Island: 26.7%
- New York: 26.4%
- Connecticut: 26.2%
- Massachusetts: 25.5%
- Florida: 24.9%
- Oregon: 24.4%
- Nevada: 24.2%
- Vermont: 23.2%
Nearly a third of Hawaiian households spend more than 30% on housing, with California and New Jersey trailing close behind.
In contrast, the following five states had the lowest percentage of cost-burdened homeowners. West Virginia had the lowest share of all 50 states.
- West Virginia: 14.3%
- Indiana: 15%
- North Dakota: 15.6%
- Iowa: 15.8%
- South Dakota: 16%
In addition to Hawaii, it makes sense that coastal hubs like California and New York tend to have high shares of homeowners who put more than 30% of their income toward housing. While the median income in these states is significantly higher than the bottom-ranked states, housing costs are also elevated.
The median household salary in New York is about $75,000, while it's closer to $50,000 in West Virginia, according to U.S. Census data. But the average list price for a home in New York is $639,945, compared with $229,900 in lowest-ranked West Virginia, according to Realtor.com data.
Even with the bump in pay, New Yorkers spend much more of their paychecks on homes.
And while not included in this study, rent tends to be higher in states where homes are less affordable, so renters don't see much relief there, either.
It's perhaps not surprising that Hawaii takes top spot, however, as it's ranked as the most expensive state to buy a home, according to a 2022 Homebuyer.com study. As with fourth-ranked Rhode Island, there's a limited amount of land to develop in Hawaii, which has pushed up housing costs.
DON'T MISS: Want to be smarter and more successful with your money, work & life?Sign up for our new newsletter!
Get CNBC's free report,11 Ways to Tell if We're in a Recession,where Kelly Evans reviews the top indicators that a recession is coming or has already begun.
Check out:Inflation slows to 4.9% in April—here's what to expect for the rest of 2023
VIDEO8:5108:51
How a 32-year-old earning $230,000 a year in Washington, D.C. spends her money
Analyzing the housing affordability landscape within the United States involves a comprehensive understanding of various factors such as median incomes, housing costs, regional cost of living disparities, and economic nuances. As someone well-versed in this domain, let's delve into the components highlighted in the provided article.
Firstly, the concept of housing cost burden, as defined by spending more than 30% of one's income on housing expenses, serves as a pivotal metric in assessing the financial strain faced by homeowners. This criterion, often referred to as the "30% rule," is a guideline employed by financial planners to maintain a balance between housing expenses and other essential expenditures within a monthly budget.
The analysis conducted by LendingTree sourced data from the U.S. Census Bureau to juxtapose median household incomes against comprehensive housing costs, encompassing mortgages, taxes, insurance, utilities, and HOA fees. This methodology offers a holistic view of the financial impact of homeownership across different states, highlighting the disparities in affordability.
The findings elucidate that Hawaii stands out as the state where the highest proportion of households, approximately 31.8%, allocate more than 30% of their income toward housing expenses. This high percentage is predominantly attributed to Hawaii's exorbitant cost of living, with a median home list price soaring to $852,500, according to Realtor.com.
Moreover, coastal hubs like California and New York also exhibit elevated percentages of homeowners facing housing cost burdens, despite higher median incomes in these regions. For instance, in New York, where the median household salary hovers around $75,000, homeowners contend with a substantial average home list price of $639,945. This scenario underscores how even with comparatively higher incomes, housing affordability remains a significant challenge in certain states due to inflated housing costs.
Conversely, states like West Virginia showcase a lower share of households, merely 14.3%, grappling with housing cost burdens. The comparatively lower median home prices, such as $229,900 in West Virginia, align with the lower median household incomes in these regions, reflecting a more affordable housing landscape for residents.
Factors contributing to these disparities include the availability of land for development, geographical constraints impacting housing supply, and varying regional economic conditions. For instance, limited land availability in Hawaii, as well as Rhode Island, has propelled housing costs upward, accentuating the financial strain on residents.
In summary, the intricacies of housing affordability across the United States stem from a complex interplay of income levels, regional cost disparities, housing supply constraints, and the overall economic landscape. Understanding these multifaceted elements is essential to comprehend the diverse challenges faced by homeowners in different states.
