Where Incomes Climbed the Most and What It Takes to Buy a Typical Home in Every State

U.S. household incomes rose over the past year, but the increase still lagged far behind the surge in housing costs, according to new Census Bureau data.

The bureau’s latest American Community Survey shows the national median household income climbed to $84,780, up about 3.8% from the prior year.

In nominal terms, incomes increased in every state except Alaska, where they slipped 0.47%. Rhode Island led the nation with a 9% gain, followed by Virginia at 7.9% and Wyoming at 7.1%. After adjusting for inflation, however, only 37 states posted real income growth.

Even so, the strongest income gains were not enough to offset the affordability squeeze created by elevated mortgage rates and high home prices.

According to Realtor.com housing and income analysis, the typical U.S. household in 2025 earned about 27% — or $31,136 — less than what is considered necessary to buy a $419,250 home, the national median listing price in September 2026.

That was a worse position than the previous year, when the median U.S. household income fell about 24% short of the amount needed to buy a home.

A widening gap

Realtor.com’s model uses a mortgage rate of 7.32%, a 10% down payment, and 1.7% in annual property taxes and insurance. It also follows the 30% rule, which holds that buyers should spend no more than 30% of gross monthly income on housing.

When the same approach is applied to state-level home prices and incomes, no state comes out as a place where a median-income household can buy the median-priced home without being cost-burdened.

“States have moved further from affordability on average, driven by higher mortgage rates,” said Realtor.com senior economist Hannah Jones. She noted that the average rate on 30-year fixed mortgages rose by more than one percentage point from a year earlier, reducing buyer budgets and erasing some of the benefit from softer home prices and higher pay.

“In September, home prices fell year over year in 40 of the 50 states and nationally,” she added. “Incomes also rose slightly on average between 2024 and 2025, so higher mortgage rates account for the deterioration in affordability in almost every case.”

Across the 50 states and Washington, DC, the income needed to comfortably afford a median-priced home is between 2.9% and 56.1% above actual state-level earnings.

In short, housing is unaffordable nationwide, though the size of the gap differs sharply from market to market.

The Midwest stays within reach

The overall picture is almost unchanged from the previous year, with the Midwest still the most affordable region.

Iowa remained the most affordable state for buyers for the second year in a row. In 2025, the typical local household earned $78,483, just $2,287, or 2.9%, below the income needed to afford the state’s median-priced home of $284,900.

“We have a strong job market, which I think is the biggest factor,” said Chuck Simmons, a broker and mortgage originator at Motto Mortgage in Des Moines, Iowa. “Iowa has always been strong in the insurance and healthcare sectors, but the rise of data centers has brought a lot of additional good-paying job opportunities.”

Simmons also pointed to stable home prices as a reason for the state’s relative affordability.

“This past year saw around 3% in appreciation, which is on the lower end compared to many other states. But it had led to steady growth without any noticeable bubbles or risk of widespread depreciation,” he said. “These factors, combined with a strong state housing program for first-time homebuyers, has created an environment where owning outweighs renting in most situations.”

Iowa’s performance fits with its A grade and second-place finish nationwide, behind Indiana, in the 2026 Realtor.com Housing Report Cards.

Even so, Simmons said closing costs, insurance premiums, and property taxes still weigh on buyers. He also echoed the need for lower borrowing costs.

“A 1% drop in rates on a $300,000 loan would lower a payment by around $200 a month on a 30-year loan,” he said. “Or, for the same payment, a 1% drop in rates would increase a buyer's purchasing power by around 10%. That kind of savings would definitely make a huge difference in affordability.”

Other Midwestern and Rust Belt states also posted relatively small income deficits, including Illinois, Pennsylvania, Ohio, and Kansas, where the shortfalls ranged from 3.5% to 4.9%.

“Home prices in these states are well-aligned with local incomes,” Jones said. “Growing demand has pushed prices up and eroded some of that advantage, but they still perform best in today’s challenging market.”

The West and coastal markets remain the toughest

At the other end of the spectrum, high-cost coastal and Western states face the steepest barriers to homeownership, with Montana ranking last.

In Montana, the typical household earns $77,099, which is nearly 56%, or about $99,000, below the income needed to finance a median-priced home of $635,000.

Chase Heiland, a real estate broker with Keller Williams Montana Realty, said the state’s large gap between home prices and household income reflects sustained demand and limited supply.

“Prices only run that far ahead of local wages when more people want in than there are homes available,” Heiland said.

On the supply side, he said many homeowners have significant equity and are not forced to sell because of desperation or foreclosure. Some owners who want to sell but cannot get their price choose to rent instead.

High construction costs also keep inventory tight in Montana.

“Most of the materials have to be shipped in from out of state, Montana is short on construction workers in every region, and winter leaves builders only part of the year to work outside,” Heiland said. “So new homes cost a lot more to put up here than most people expect, especially when you combine that with impact fees most cities and counties impose.”

Montana received a D in Realtor.com’s state report cards, weighed down by prices and building costs that have outpaced what average buyers can manage.

The affordability crunch has pushed many median-wage earners to rent longer or move farther out to commute.

“I see the same thing in the Bozeman area, where people are heading out to Belgrade, Manhattan, and Three Forks for more house,” Heiland said.

Still, he said there are some signs of improvement in the market.

“I’ve worked with more local first-time buyers and move-up buyers than I have in years,” he said. “Wages have come up, there’s more room to negotiate than there was a few years ago, and the people I’m working with are more ready to make decisions than I’ve seen before.”

He said that shift reflects buyers gradually adjusting to a higher-rate environment.

“A lot of buyers were holding out for interest rates to come down dramatically, and since that hasn’t happened, more people are planning around today's interest rates,” Heiland said. “Life keeps moving forward for everyone, and they still want to make decisions about where they live and put down roots here.”

Over time, he said, Montana would need a mix of structural and policy changes to become meaningfully more affordable, though each comes with trade-offs.

“Impact fees, permitting, and the regulations a builder has to work through all end up in the price of new-construction homes, so easing those where it’s reasonable would help supply,” he said. “That’s a bit of a catch-22, though, because more development changes how these towns feel, and a big part of why people choose Montana is that they don’t want suburban density.”

He also said cities and counties need long-term tools such as permanent affordability trusts and income-restricted rentals to keep housing attainable for low- and middle-income families.

“When cities set affordability targets, they usually use 60% or 80% of area median income, and for a lot of working households, that still isn’t a realistic or attainable number,” he said.

Montana is not the only state under pressure. Buyers in California face a 49% gap between earned income and the income required to afford a home, followed by Idaho at 48.6%, Hawaii at 48.2%, and New York at 46.7%.

“High demand and limited new construction keep inventory scarce and affordability strained in these states,” Jones said. New York, Hawaii, and California all received failing grades in the report cards.

Get real estate news in your inbox