Here’s the Income You Need To Afford a $500K Home in Every State


Dillon Kydd / Unsplash

Dillon Kydd / Unsplash

If you want to enter the real estate market, you’ve probably already looked into the calculations to determine how much you would need to save up for a 20% down payment and what your monthly payments would be. Before you apply for a mortgage, you want to ensure that you have the income and savings required to purchase a home to ensure you can afford to become a homeowner. We will break down the current real estate market and determine the income needed to afford a $500,000 home in every state.

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When interest rates dropped during the pandemic, home prices skyrocketed as many used this as an opportunity to enter the real estate market. However, the current real estate market is drastically different from the scenario in 2020.

According to the National Association of Realtors (NAR), existing-home sales went up 3.1% in January from December 2023, but sales are down 1.7% from one year ago. The median sale price for the country was at $379,100, which is a record high for the month of January and an increase of 5.1% from just one year ago. First-time homebuyers made up for 28% of sales in January, which is a drop from 29% in December.

Inventory for January was at a three-month supply, which means we’re currently in a seller’s market. The low inventory is an issue for potential buyers nationwide because a supply of five to six months is needed for a balanced market.

As of January, about 89% of those with a mortgage have a rate that’s lower than 6%, according to Redfin. This means that most homeowners are paying less than the current mortgage rate, which means they’re not likely to sell because they may not want to purchase another home with a higher interest rate. This impacts the housing market since inventory is lower than normal, and the supply issues keep housing prices high. Those looking to enter the real estate market are struggling because they either can’t find the home they want or save up enough for a down payment.

With the aggressive rate hike campaign from the Federal Reserve in an attempt to cool down soaring inflation, home ownership has become more expensive. The combination of higher mortgage payments and limited inventory is causing frustrations.

While it’s difficult to predict what will happen to the market in 2024, many experts are waiting to see if the Fed will drop rates to make mortgage payments more affordable. If the rates drop significantly in 2024, there’s a chance that more homeowners would be willing to sell, which would address the supply issues.

To determine the income you need to afford a $500,000 home in every state, GOBankingRates compiled data. We will break down the income you need to afford a $500,000 home in every state, along with your monthly mortgage.

DenisTangneyJr / iStock.comDenisTangneyJr / iStock.com

DenisTangneyJr / iStock.com

Alabama

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sorincolac / Getty Images/iStockphotosorincolac / Getty Images/iStockphoto

sorincolac / Getty Images/iStockphoto

Alaska

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DenisTangneyJr / Getty Images/iStockphoto

Arizona

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shuttersv / Shutterstock.com

Arkansas

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Kirk Wester / Getty Images/iStockphoto

California

Muhammad Zulkifal / Getty Images/iStockphotoMuhammad Zulkifal / Getty Images/iStockphoto

Muhammad Zulkifal / Getty Images/iStockphoto

Colorado

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benedek / Getty Images

Connecticut

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BrianEKushner / Getty Images/iStockphoto

Delaware

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©iStock.com

Florida

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Sean Pavone / iStock.com

Georgia

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Art Wager / Getty Images

Hawaii

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Jennifer_Sharp / Getty Images/iStockphoto

Idaho

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Mlenny / Getty Images

Illinois

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DenisTangneyJr / Getty Images/iStockphoto

Indiana

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Joel Carillet / Getty ImagesJoel Carillet / Getty Images

Joel Carillet / Getty Images

Iowa

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TriggerPhoto / iStock.com

Kansas

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Real Window Creative / Shutterstock.com

Kentucky

Susanne Neumann / Getty Images/iStockphotoSusanne Neumann / Getty Images/iStockphoto

Susanne Neumann / Getty Images/iStockphoto

Louisiana

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DenisTangneyJr / Getty Images/iStockphoto

Maine

Tim Pruss / Getty ImagesTim Pruss / Getty Images

Tim Pruss / Getty Images

Maryland

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DenisTangneyJr / Getty Images/iStockphoto

Massachusetts

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pawel.gaul / Getty Images

Michigan

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LIKE HE / Getty Images/iStockphoto

Minnesota

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DenisTangneyJr / iStock.com

Mississippi

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Art Wager / iStock.com

Missouri

DianeBentleyRaymond / Getty ImagesDianeBentleyRaymond / Getty Images

DianeBentleyRaymond / Getty Images

Montana

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Shots by Natalie / Shutterstock.com

Nebraska

DenisTangneyJr / Getty ImagesDenisTangneyJr / Getty Images

DenisTangneyJr / Getty Images

Nevada

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DenisTangneyJr / Getty Images/iStockphoto

New Hampshire

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DenisTangneyJr / Getty Images/iStockphoto

New Jersey

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benedek / Getty Images

New Mexico

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cmart7327 / Getty Images/iStockphoto

New York

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Kruck20 / Getty Images/iStockphoto

North Carolina

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DenisTangneyJr / Getty Images

North Dakota

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Sean Pavone / Getty Images/iStockphoto

Ohio

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DenisTangneyJr / iStock.com

Oklahoma

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benedek / Getty Images

Oregon

Sean Pavone / Getty Images/iStockphotoSean Pavone / Getty Images/iStockphoto

Sean Pavone / Getty Images/iStockphoto

Pennsylvania

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kickstand / Getty Images

Rhode Island

Tony Cane-Honeysett / Getty ImagesTony Cane-Honeysett / Getty Images

Tony Cane-Honeysett / Getty Images

South Carolina

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DenisTangneyJr / iStock.com

South Dakota

Jonathan Ross / Getty Images/iStockphotoJonathan Ross / Getty Images/iStockphoto

Jonathan Ross / Getty Images/iStockphoto

Tennessee

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RoschetzkyIstockPhoto / Getty ImagesRoschetzkyIstockPhoto / Getty Images

RoschetzkyIstockPhoto / Getty Images

Texas

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miroslav_1 / Getty Images/iStockphoto

Utah

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DenisTangneyJr / iStock.com

Vermont

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ferrantraite / Getty Images

Virginia

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benedek / Getty Images

Washington

DenisTangneyJr / Getty Images/iStockphotoDenisTangneyJr / Getty Images/iStockphoto

DenisTangneyJr / Getty Images/iStockphoto

West Virginia

Ultima_Gaina / Getty ImagesUltima_Gaina / Getty Images

Ultima_Gaina / Getty Images

Wisconsin

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jmoor17 / Getty Images

Wyoming

Methodology: To find How Much Income Do You Need To Buy a $500K Home in every state, GoBankingRates found the National 30 Year Fixed Rate for a mortgage sourced from Federal Reserve Economic Resarch (6.90%). The property taxes for each state were also collected sourced from Tax Foundation. Then GOBankingRates calculated the annual mortgage cost if someone put a 5% downpayment, 10% downpayment, 15% downpayment, and 20% downpayment on a $500,000 home mortgage. Using the property tax as well as the calculated mortgage options, a yearly cost can be estimated for each state. Most financial experts suggest that your housing costs should not be over 30% of your salary, so GOBankingRates calculated the income required to pay for a $500k home mortgage assuming the yearly mortgage costs are no more than 30% of expenses. All data was collected and is up to date as of Feb. 28, 2024.

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This article originally appeared on GOBankingRates.com: Real Estate 2024: Here’s the Income You Need To Afford a $500K Home in Every State

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