Average Hourly Wage by State and How Much Home You Can Afford

The amount that homebuyers make will factor into how much they can buy, depending on the region of the country they live in. Homebuyers’ earning power plays a major role in what they can afford—and depending on the region of the country they live in, the amount they make will factor into how much home they can buy.

Introduction to Average Hourly Earnings

The US Bureau of Labor Statistics compiled the average hourly earnings by state—figures that directly influence housing markets nationwide. “Affordability is supported by salaries, which are driven by demand,” Ben Mizes, real estate agent and co-founder of Clever Offers, tells Realtor.com. “When average earnings are high, more people can afford to qualify for mortgages, and that increases competition.” This, in turn, pushes housing costs upward. “Real estate prices and rents are directly correlated with an area’s income,” says Bruce Ailion, attorney and real estate professional at Re/Max Town & Country in Atlanta. “The higher the income, the higher the price.”

Greater Earnings Give You More Choices

If someone has more income to spend, that can work in their favor in a number of ways. “Depending on where they’re buying, they can get more space, mountain or coastal views, or a better location,” Cara Ameer, a real estate agent with Coldwell Banker who is licensed in Florida and California, explains to Realtor.com. When you earn a higher wage, you typically have more options—but not always. “You could have a situation in a high-income area where your salary is above average nationally but still not enough to afford local housing,” says Martin Orefice, founder of Rent to Own Labs in Orlando, FL.

Lower Average Wages Give Investors an Edge

In places where people earn less, homes usually cost less, too. “Despite lower incomes, many of the nation’s lowest-earning states offer better housing alignment with wages than top-earning states do,” says Hannah Jones, senior economic research analyst at Realtor.com. However, in today’s climate, it can still be difficult for local buyers to break into the market—which is when investors step in. “We buy homes in these areas because they’re less expensive and there’s still a need for affordable housing,” says real estate agent and investor Ron Myers. “A lot of us believe that as wages slowly go up, home values will go up, too.”

States with the Highest Average Wages

“On average, the nation’s highest-earning states fare worse on housing affordability than the lowest-earning ones,” says Jones. Minnesota stands out as an exception, combining one of the highest average hourly wages with home prices below the maximum affordable level. “In contrast, California and Massachusetts perform far worse, with typical home prices roughly 70% higher than what local wages can comfortably support,” says Jones.

1. Washington, D.C.

Average hourly wage: $54.23
Median home listing price: $584,975
Max home price a worker at average hourly wage would be able to afford (with 20% down): $574,314
Price difference: 1.9%
Italianate-style row homes in Washington D.C. qingwa – stock.adobe.com

2. Washington

Average hourly wage: $42.30
Median home listing price: $639,975
Max home price a worker at average hourly wage would be able to afford (with 20% down): $447,971
Price difference: 42.9%

3. Massachusetts

Average hourly wage: $41.74
Median home listing price: $749,450
Max home price a worker at average hourly wage would be able to afford (with 20% down): $442,040
Price difference: 69.5%
Historic houses in Wellesley, Massachusetts. Wangkun Jia – stock.adobe.com

4. California

Average hourly wage: $41.09
Median home listing price: $740,368
Max home price a worker at average hourly wage would be able to afford (with 20% down): $435,157
Price difference: 70.1%
The average hourly wage in California is $41.09. Matt Gush – stock.adobe.com

5. Minnesota

Average hourly wage: $39.53
Median home listing price: $379,950
Max home price a worker at average hourly wage would be able to afford (with 20% down): $418,636
Price difference: -9.2%

States with the Lowest Average Wages

Among the lowest-earning states, nearly all, with the exception of New Mexico, have home prices at or below affordable levels based on local incomes. “In general, higher-wage states also have significantly higher home prices, while lower-wage states tend to see home values more in line with local earning power,” says Jones.

1. Mississippi

Average hourly wage: $28.10
Median home listing price: $299,000
Max home price a worker at average hourly wage would be able to afford (with 20% down): $297,588
Price difference: 0.5%

2. New Mexico

Average hourly wage: $29.14
Median home listing price: $399,900
Max home price a worker at average hourly wage would be able to afford (with 20% down): $308,602
Price difference: 29.6%

3. Arkansas

Average hourly wage: $29.62
Median home listing price: $305,750
Max home price a worker at average hourly wage would be able to afford (with 20% down): $313,686
Price difference: -2.5%
Houses in Bentonville, Arkansas. Sono Creative – stock.adobe.com

4. Louisiana

Average hourly wage: $29.71
Median home listing price: $275,750
Max home price a worker at average hourly wage would be able to afford (with 20% down): $314,639
Price difference: -12.4%
A neighborhood in Baton Rouge, Louisiana. Fang – stock.adobe.com

5. West Virginia

Average hourly wage: $29.88
Median home listing price: $257,000
Max home price a worker at average hourly wage would be able to afford (with 20% down): $316,439
Price difference: -18.8%

Conclusion

In conclusion, the average hourly wage by state plays a significant role in determining how much home one can afford. The 30% rule, which recommends spending no more than 30% of income on a house, can help homebuyers make informed decisions. However, it is essential to consider other factors such as location, lifestyle, and personal financial goals when determining how much home one can afford.

FAQs

• Q: What is the 30% rule in home buying?
  A: The 30% rule recommends spending no more than 30% of one’s income on a house.
• Q: How does the average hourly wage by state affect home affordability?
  A: The average hourly wage by state directly influences home affordability, as higher wages can lead to higher home prices and increased competition.
• Q: Which states have the highest average wages?
  A: The top 5 states with the highest average wages are Washington, D.C., Washington, Massachusetts, California, and Minnesota.
• Q: Which states have the lowest average wages?
  A: The bottom 5 states with the lowest average wages are Mississippi, New Mexico, Arkansas, Louisiana, and West Virginia.
• Q: How do investors benefit from lower average wages?
  A: Investors can benefit from lower average wages by purchasing homes in areas with lower prices and potentially higher future appreciation.