Homeownership a dream increasingly out of reach for many — especially first-time buyers
By Karee Blunt
Wealth of Geeks
Choosing between a 2,300-square-foot home in Michigan or a 400-square-foot home in Hawaii? Surprisingly, the cost is the same, which only helps to emphasize the wide range of affordability in homes nationwide.
Those aren’t the only states with considerable disparities in housing costs. The past decade has seen a monumental shift in the American real estate market. Housing prices have skyrocketed, making homeownership a dream that seems increasingly out of reach for many, especially those looking to buy for the first time.
The financial burden of buying a house has grown heavier, particularly in several states where the price tags on homes have ballooned to four times what they were just a decade ago.
—————
Some states saw housing costs triple or quadruple
Homes purchased ten years ago in Idaho, Florida, Nevada, and Georgia are now worth three times what they were.
Remarkably, if one bought a house in Shelbyville, TN, Palatka, FL, or Sherman, TX, in 2013, the buyer would have paid a quarter of what the same property is worth in 2023.
—————
Least affordable states for home ownership
The real estate landscape in 2023 reveals a stark contrast in housing affordability across different states. At the top of the scale are states where housing prices have surged to daunting heights.
These states — Hawaii, California, Massachusetts, Washington, and Colorado — have seen housing costs soar to a point where they are now considered the least affordable in the country.
Washington State homeowner Rodney Blunt says, “Our house value has increased significantly since we bought it nine years ago, and it’s tempting to think about selling, taking the profit, and moving somewhere cheaper. It’s hard to imagine how our kids are going to afford to buy homes in this state if we stay here.”
—————
Living in paradise has a steep price tag
With almost 10 million Americans visiting Hawaii last year, the idea of moving there might be tempting for some. However, reality dictates caution — such a move is simply out of reach for most people.
The median price to buy a house in the Aloha State is $966,277. This translates to a 20% down payment of $193,255.40, with a monthly mortgage payment of $5,247.18. California follows close behind Hawaii, where the median house price is $744,023, requiring a down payment of $148,804.60 and monthly payments of $4,064.07.In Massachusetts, a person would have to shell out $576,889 for a median-priced home, with a 20% down payment of $115,377.80 and monthly payments of $3,128.00. The median house price in Washington is nearly identical to Massachusetts at $576,090.In Colorado, the median house price is $551,616.Given that the average annual income for a full-time employee in the United States is $57,200, the monthly mortgage payment exceeds what they earn. Furthermore, the average American under 34 has $3,240 in savings, making a 20% down payment almost impossible for first-time homeowners.
—————
Most affordable states for homeownership
On the other end of the scale are states with significantly lower housing costs, making homeownership a more attainable goal.
The states topping the list for affordability in 2023 include West Virginia, Mississippi, Arkansas, Louisiana, and Kentucky.
West Virginia leads the pack with the most affordable housing in the United States. Here, the median house price is a relatively modest $146,499. This would require a 20% down payment of $29,299.80 and a monthly mortgage payment of only $792.36.
Trailing just behind West Virginia is Mississippi, where the median house price is $161,582. A home in this state requires a 20% down payment of $32,316.40 and monthly payments of $883.22.
Arkansas, Louisiana, and Kentucky also top the list of most affordable states for homebuyers. In Arkansas, would-be homeowners will pay $178,264 for a median-priced home, while in Louisiana and Kentucky, the median house prices are $183,113 and $189,531, respectively.
The significant price gap between the most and least affordable states underscores the disparity in housing costs nationwide. However, housing affordability in these states offers hope for potential homeowners who can’t afford to buy in the most expensive states.
It’s also worth noting these states offer many perks associated with the more expensive states, including employment opportunities and access to amenities.
—————
For even lower prices, see Illinois and Pennsylvania
While those five states mentioned above have the lowest median-priced homes, there are pockets of affordability scattered across the nation. In 2023, the most affordable cities for homeownership are in Illinois and Pennsylvania.
For example, the median price of a home in Sunbury, Pennsylvania is $63,040, with a monthly mortgage payment of about $340.93. Other affordable cities include Sterling and Carbondale in Illinois, and Pottsville, Pennsylvania, with houses under $100,000 and monthly payments under $500.
Charleston and Danville in Illinois also offer houses for about $95,000 with modest monthly payments above $500.
Bethel Park, Pennsylvania, is also ranked among the wealthiest towns in America, making it an even more attractive state for relocation.
—————
Tax implications of soaring mortgage rates
Lisa Holcomb, executive director of the Bastrop Opera House, shares that taxes on her in-laws’ home in Sherman, TX have increased so much that it will be almost impossible to keep the property in the family when the time comes. “It’ll be hard on all the kids and grandkids to let it go. It’s where we all come together for holidays and celebrations, but the ‘value’ has increased so much over the years, it’s taxed us right out of the picture.”
—————
Is it smart to buy a house now?
Here’s what one analyst has to say for potential homeowners wondering whether to buy now or wait and hope prices come down again.
“In the short term, it’s highly improbable that housing prices in the United States will experience a significant increase,” says June Jia, owner of Canny Trading Quantitative Researcher at GF Securities. As the Federal Reserve persistently raises interest rates, housing demand will likely be suppressed due to the rising cost of borrowing. The current economic landscape in the United States remains relatively stable, making it doubtful that the Federal Reserve will reduce interest rates in the near future.”
In other words, peering into the future might resemble gazing through a dense fog. However, for homeowners hoping to get their financial house in order, now might be the prime time to pick up the keys to a new home.
