With housing costs consuming up to 50 percent of the median income in some states, the personal-finance company WalletHub recently released its report on the “States Where People Spend the Most & Least on Housing” to highlight where homeownership is least affordable for the average resident.
For this report, WalletHub analyzed mortgage and home energy payments across all 50 states. These costs were then combined and compared with each state’s median household income to determine where people spend the largest share of their income on housing.
People in Hawaii spend the most on housing as a percentage of their income. The average Hawaiian shells out 50 percent of their income between monthly mortgage payments and home energy costs. For comparison, Iowa residents only spend an average of around 17 percent of their income on housing costs.
Hawaii residents actually have the fourth-highest median household income in the country, at $100,389. However, housing is so expensive in the state that people end up spending a disproportionate amount of their income on it, according to the survey.
Hawaii has both the most expensive mortgage (principal and interest) payments and the highest home energy costs in the country, solidifying its rank as the costliest state in our study.
Californians spend the second-most money on housing, with average costs reaching 43 percent of the median household income in the state. Since California has the fifth-highest median household income in the country, at $99,122 per year, this indicates that the cost of living is extremely high.
People in California have the second-highest mortgage payments in the country and the sixth-highest home energy costs.
Massachusetts ranks third among the states where people spend the most on housing. The average resident pays around 34 percent of their income in housing costs. While that’s a significant difference from the percentages spent in Hawaii and California, it’s still far from cheap.
Massachusetts has the second-most expensive home energy costs in the U.S., and the third-most expensive mortgage costs, which is why it ranks so high in this study. In addition, Massachusetts has a higher median household income than the other top states, at $103,960 per year, which means that even a higher median household income doesn’t fully offset the state’s high housing and energy costs.
Iowa ranked as the state where people spent the least on housing, while Oklahoma was last when it came to renter spending.
“Homeowners and home buyers have faced whiplash over the past few years, with housing prices soaring and interest rates fluctuating from historic lows back up to the highest rates in more than a decade,” WalletHub Analyst Chip Lupo said. “In the most expensive state, housing costs can take up around 50 percent of the median income. In order to manage expensive mortgage payments and other key housing costs, it’s important for homeowners to budget effectively.”
“For comparison, Iowa residents only spend an average of 17 percent of their income on housing costs, Lupo added”
Additionally, the survey offered tips for saving on housing including getting a shorter mortgage, improving your budgeting skills, making a large down payment, minimizing your use of utilities and improving your credit before buying.
For more stories on housing affordability, visit our sister publicationThe Title Report's Housing Inventory & Attainability Watch library.