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In One Chart: This state has the least affordable housing market in the U.S. based on income — and it’s NOT California

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New homes are out of reach for many households nationwide — but in some states only a small fraction of families can afford to purchase a newly-built house.

A new analysis from HowMuch.net, a financial literacy website, explored what percentage of households in each state nationwide, plus the District of Columbia, could afford the cost of a newly-constructed home.

The analysis used median home-price data from the National Association of Home Builders and statistics on housing affordability from the National Association of Realtors, which accounted for median income levels and mortgage rates.

The least affordable state, by this measure, was not necessarily the most expensive housing market in the country. According to HowMuch.net’s analysis, Vermont was the least affordable state. Only 16% of households could afford a mortgage payment on the median-priced new home, which costs roughly $476,000.

Connecticut came in at No. 2, with only 21% of households being able to withstand the cost of a new home there, followed by Wyoming at 23%. The analysis noted that housing affordability issues cut across all parts of the country, from predominately rural areas to more urban states.

Moreover, there were only three states where more than half of the households could afford a new home: Delaware (69%), Maryland (57%) and Virginia (54%).

The cost of new homes has certainly become a more major concern for many home buyers in today’s market. The coronavirus pandemic has helped fuel outsized demand for housing across the country. Buyers have quickly scooped up existing homes as they hit the market, pushing the inventory of existing homes for sale to record lows.

As a result, many Americans, including even first-time home buyers, have turned to the pricier market for new homes. But much like existing homes, newly-built homes are getting more expensive, in part because of the rising cost of the lumber used to construct them.

High home prices are only one factor that influences affordability. “If a lot of families have high enough incomes to support themselves, then an expensive housing market in itself doesn’t make homeownership impossible,” the analysis notes.

The report compared Arizona and California. In both states, a third of households could afford a median-priced new home. But the prices differed substantially between the two states: A median-priced new home costs $527,000 in California, but only $416,000 in Arizona.

“This suggests that runaway housing prices aren’t the only contributor to the affordability crisis,” the analysis noted. “Wages are an equally important factor to consider.”

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