Californians Devote Largest Portion of Income to Housing Costs, but Relief is on the Horizon

Californians spend, on average, 28.84% of their annual income on homeownership costs. The state's median income of $84,097 means residents are spending $24,252 a year just to own their home.

A new study by real estate website reveals Californians spend the highest income ratio on home ownership

California homeowners may feel the sting of sustained inflation – or see the most savings from a rebalance of the economy.

The latest Consumer Price Index (CPI) released on August 10 indicates that shelter costs are the most significant factor subject to the fluctuation of a volatile inflation rate.

By analyzing census data, researchers identified the average yearly housing cost in each state proportionate to median income. They examine costs, including mortgage repayments, various insurances, property taxes, utility bills, fuel bills, mobile home costs, and condominium fees, to reveal which states cost the most to own a home.

Which States Spend the Most on Housing Costs

California is a standout among American states, with the highest ratio of housing costs in the country. The high cost of living and housing may drive Californians to look for alternative ways to make money.  

On the other coast, New York is just a little behind California, with 24.8% of expenses funneled to home costs. An average income of $75,157 translates to $18,636 in home expenses per household.

The third-highest is New Jersey, with a median income of $89,703 and housing costs at 24.75%. 

Hawaii ranks fourth for states where homeowners spend most of their income on housing costs. The average price for a homeowner in Hawaii is $21,732 per year, 24.69% of the $88,005 median income.

Fifth place goes to Connecticut, where average annual costs to homeowners are $20,460, representing 24.48% of the state median income of $83,572.

The top ten list also includes the states of Massachusetts in sixth, Rhode Island in seventh, Oregon, Washington, and Nevada in eighth, ninth, and tenth, respectively.

Massachusetts homeowners spend an average of 24.18% on home costs. Rhode Island residents spend 23.57% on average. Oregon sees 22.84% of expenses dedicated to homeownership, while Washington state stands at 22.83% and Nevada at 22.51%. Each state may benefit from additional income to offset its costs until inflation balances out. 

A spokesperson for says, “California is known for relatively higher housing costs, yet it is still surprising to see how much higher the costs to the homeowner are in the state compared to the rest of America. The homeowners of the next closest state, New York, spend 15.1% less on average than homeowners in California when accounting for differences in household income.” 

They go on, “It will be particularly interesting to see how the rising cost of living impacts these figures and whether California's cost to the homeowner continues to remain so high compared to the rest of America.”

Which States Spend the Least on Housing Costs

The research reveals that Americans living in West Virginia spend the lowest percentage of their income on housing costs. On average, residents spend 13.75% of their $50,884 income on home ownership. This ratio equals just $6,996 spent yearly to keep roofs over their heads.

North Dakota steals the second place slot on the list of lowest housing cost ratios, with 15.57% of their earnings going towards these costs. An average income of $68,131 means $10,608 is spent yearly on housing. 

Their neighbors to the south claim third place, as the lower Dakotans pay $10,536 per year on housing, which makes up 16.48% of their average $63,920 annual salaries. 

Fourth goes to Arkansas residents, whose lower median income is complemented by a low ratio of housing expenses. Bringing in $%3,123 annually, they spend $8,616 on housing or 16.53% of their total income. 

With the lowest overall median household income in America at $49,111, Mississippi ranks fifth lowest for housing cost ratios, with 16.64% or $8,172 spent annually on homeownership. 

In rankings six through ten, we have Iowa with a ratio of %16.76%, Alabama at 17.1%, Oklahoma at 17.17%, Wyoming at 17.21%, and Indiana rounding out the list with 17.3%.

The Latest CPI Shows Housing is Sector to See Most Reprieve in Future

The latest CPI Report indicates that shelter costs contributed 90% of total inflation in July. However, Americans need not worry for long. Economic researchers at the Federal Reserve Bank of San Francisco predict a sharp turnaround ahead.

You may recall the significant effect that the initial interest hikes by the Federal Reserve had on housing. Shelter expenses felt the impacts early in the battle against inflation, and today, despite monthly costs only going up by 0.4%, overall, they are up 7.7% since last year. 

But Americans need to take their time to bring in more income, as incremental decreases suggest a slow-moving trend towards achieving balance once again. The San Francisco Fed researchers believe the most significant contraction in shelter inflation since the Global Financial Crisis of 2007 to 2009 could be on our horizon.

This post was produced by Mama Say What?! and syndicated by Wealth of Geeks.