With housing costs taking up as much as 50 percent of the median income in some states, it’s a difficult for many people to buy a home or even rent an apartment, and the challenges are especially great for young adults.
“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,” said Chip Lupo, analyst for WalletHub, a personal finance website.
A WalletHub has prepared a report, “States Where People Spend the Most and Least on Housing” to highlight where owning a home is unaffordable for the average person.
“People in Hawaii spend the most on housing as a percentage of their income,” Lupo said. “The average Hawaiian shells out nearly 53% of their income between monthly mortgage payments and home energy costs. For comparison, Iowa residents only spend an average of less than 19% of their income on housing costs.”
The results of the report are as follows:
Highest % of income spent Lowest % of income spent
- Hawaii –47% 41. Arkansas – 21.21%
- California – 45.99% 42. Oklahoma – 20.96%
- Oregon – 36.27% 43. Indiana – 20.83%
- Nevada – 35.29% 44. Mississippi – 20.79%
- Washington – 34.82% 45. Illinois – 20.56%
- Massachusetts – 34.61% 46. Ohio – 20.38%
- Colorado – 34.39% 47. Nebraska – 20.37%
- Idaho – 32.73% 48. Kansas – 20.12%
- Montana – 31.96% 49. West Virginia – 19.94%
- Utah – 31.71% 50. Iowa – 18.84%
5 tips for saving on housing
- Get a shorter mortgage: You can save a staggering amount of money on interest by taking out a 15-year mortgage rather than a 30-year mortgage. Your monthly payments will be much higher, but if you can afford it, you’ll save money in the long run.
- Improve your budgeting skills: Learning how to budget is essential for making sure you have enough money to afford your monthly housing bills on top of all your other expenses. If you haven’t purchased a house yet but plan to in the future, you should strive to budget money each month toward a down payment, after putting money toward your basic needs and paying down existing debt.
- Make a large down payment: The larger your down payment is, the less interest you’ll pay over the length of your mortgage, and the better interest rates you may receive. Plus, making a down payment of at least 20 percent of the property’s price will prevent you from having to purchase private mortgage insurance.
- Minimize your use of utilities: Utilities won’t be as big of a cost as your mortgage, but they still add up quickly. Taking shorter showers, lowering your thermostat by a few degrees during the winter, raising it by a few during the summer if you have air conditioning, turning lights off when they’re not necessary, and doing other things to minimize your use of utilities can save you a lot.
- Improve your credit before buying: The better your credit score is, the better your interest rate on a mortgage is likely to be. The best ways to improve your credit score include making on-time payments on your existing debts, keeping your credit utilization low, and checking your credit report for errors.
Final thoughts
Unfortunately, it doesn’t look like the high housing costs we currently have will change anytime soon. If interest rates don’t go down due to increasing inflation and tariffs bring on a recession, housing supply could increase, which could lead to a reduction in housing costs. However, any reduction in housing costs, although appreciated, would be small.
Wow. Hawaii over California!
People have told me it’s very expensive to live in Hawaii.
I couldn’t find Connecticut at all. I guess we fall somewhere in the middle. Interesting information.
Connecticut is No. 26. To find where your state ranks, click on the link to the report. I’ll add that when I do articles like this.