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Exploring Affordable Homeownership: Where You Can Buy a Home on Less Than $75,000 a Year

In today’s rapidly changing economic landscape, finding affordable housing has become a challenge for many Americans. However, there are still places in the United States where earning less than $75,000 a year does not put homeownership out of reach. A recent analysis by Bankrate has highlighted 14 states where individuals and families earning a median income can still afford to buy a home, providing a glimmer of hope for middle-income earners.

The Shrinking Window of Opportunity

Just four years ago, residents in 36 states could purchase a median-priced home while earning under $75,000. Today, that number has dramatically decreased to only 14 states, illustrating a significant shift towards a market that favors wealthier buyers. This change underscores the growing affordability crisis in American real estate, driven by rising home prices and economic fluctuations.

The Affordability Analysis

Bankrate’s analysis calculates the cost of homeownership based on several assumptions: a 20% down payment, the absence of homeowner association (HOA) fees or mortgage insurance, and a 30-year fixed mortgage at an interest rate of 7.05%. Using this model, the study identifies states where monthly mortgage payments do not exceed 28% of a household’s income, a common benchmark for financial health and sustainability in housing.

Where Homes Remain Affordable

The states where homes are still within reach for those earning less than $75,000 annually are predominantly located in the Midwest, South, and parts of the Rust Belt. These include:

  • Mississippi: $63,043
  • Ohio: $64,071
  • Arkansas: $64,714
  • Indiana: $65,143
  • Kentucky: $65,186
  • Iowa: $65,314
  • Oklahoma: $65,443
  • Michigan: $66,343
  • Missouri: $66,986
  • Louisiana: $67,886
  • Alabama: $69,514
  • Kansas: $72,343
  • North Dakota: $73,414
  • West Virginia: $74,957

In these regions, median home prices generally stay below $300,000, significantly less than the national median of $402,343. This pricing makes homeownership more feasible for residents, compared to states like California, where the income needed to afford a median-priced home soars to nearly $200,000.

Considerations and Trade-Offs

While the lower cost of living in these 14 states is appealing, potential homebuyers should consider other factors that might influence their decision. Many of these states have higher poverty rates and fewer opportunities for high-paying jobs, particularly because they are more rural. The economic landscape in these areas can differ vastly from more urban states, where higher incomes and job opportunities might offset the higher cost of living.

For instance, living in a state like Mississippi or West Virginia might offer affordable housing but could come with fewer career opportunities in certain industries. This trade-off requires careful consideration, especially for those looking to grow their careers or raise families.

The Bigger Picture

The disparity in housing affordability across the U.S. highlights broader economic issues, such as income inequality and the concentration of wealth. Since 2020, median home prices have increased by 27%, while mortgage rates have nearly doubled, exacerbating the challenge of buying a home for many Americans.

The most dramatic price increases have occurred in states with high demand for housing, such as California and New York. In contrast, states like Mississippi and Michigan have seen more modest increases, making them relatively more accessible for middle-income earners.

Final Thoughts

For those considering homeownership on a budget of less than $75,000 a year, these 14 states present viable options. However, potential buyers should weigh the benefits of affordable housing against other quality-of-life factors, such as job availability, educational resources, and cultural amenities. As the housing market continues to evolve, staying informed and adaptable will be key to achieving homeownership dreams within a reasonable budget.