by High housing prices are just part of what it costs to own and maintain a home for consumers of all income levels
HIGH POINT — Housing affordability is a subject that has significant implications for the furniture industry. If you can’t afford to buy a house, or your budget is stretched to the limit to afford the one you’re moving into, then you also won’t likely be purchasing much furniture.
In fact, it’s not just the cost of the house that’s a factor in housing affordability, but also things like homeowners insurance, taxes, maintenance and the purchase of other items needed in one’s home such as a refrigerator, washer and dryer, and probably a widescreen TV or two depending on the number of rooms and where people like to spend their downtime.
Thus, the findings of a recent report by luxury bath specialist Badeloft revealed some eye-opening data about housing affordability and the types of salaries needed to buy a home in the U.S.
It evaluated housing affordability in all 50 states and considered data such as home prices, tax rates, debt-to-income ratios, insurance premiums and other factors related to cost of living. While affordability is relative to income levels in various areas, the results may seem daunting, particularly for first-time homebuyers who hope to achieve a standard of living in their home that’s similar to what they may have experienced growing up.
Not surprisingly, New York, Massachusetts, California, Hawaii and New Jersey were in the top five most expensive states. For example, those living in New York needed an annual income of $195,563 to afford a home with a median price of $541,700, which the report said is the seventh highest median price nationwide, with California having the highest median price at $852,900. The report added that despite having the country’s lowest average debt-to-income ratio and a comparatively low-average home insurance cost of $2,322, New York still has the highest income requirement for owning a house because of a high effective tax rate of 1.4% and high cost of living index of 107.8.
In Massachusetts, one needs an annual income of $134,311 to buy a home with a median price of $634,100, followed by California ($121,587 for a $852,900 home), Hawaii ($100,384 for a $784,700 home) and New Jersey ($97,431 for a $510,400 home).
The five states with the lowest annual income requirements include Mississippi ($39,880 for a $238,300 home), Louisiana ($47,061 for a $254,400 home), Alabama ($47,804 for a $278,600 home), South Carolina ($48,691 for a $385,800 home) and Indiana ($49,069 for a $255,400 home).
As seen by some of the results, Southern and Midwestern states tend to have the lowest income requirements for a median-priced home, while states on the West Coast and in the Northeast have the highest income requirements. Also, for homes valued between $200,000 and $600,000, annual insurance premiums were reported to be lowest in Hawaii at $802 and highest in Kansas at $5,375, while tax rates were the highest in New Jersey at 2.23% and lowest in Hawaii at .32%.
These are some of the factors that will influence the type of house available, including younger workers, many of whom are just starting families. In many cases, both heads of the household will need to be earning an income in order to afford a median-priced home or even something smaller.
The challenge is that prices on existing homes, often a good starting point for young families, continue to rise. According to the National Association of Realtors’ latest existing home sales report, the median existing single-family home price was $424,500 in May, up nearly 5.78% from May 2023, while the existing condominium price was $371,300, up 5.1% from a year earlier. The median existing home price for all housing types in May was $419,300, up 5.8% from a year ago, and the highest price recorded by the NAR.
As we’ve previously reported, younger consumers represent a huge market for furniture. For example, our latest Consumer Insights Now research has reported that millennials ages 44 and younger will make 7 in 10 furniture purchases over the course of the survey period. It’s a consistent stat that begs the attention not only of the industry, but the housing market, where many homes, both existing and new construction, appear to be out of reach for many young consumers.
Unfortunately, much of the housing market is perhaps skewed by house hunter types of television programs where buyers have a seemingly unlimited budget not only for the house itself, but also major renovations that include replacing kitchen cabinets, counters and even rugs with wood flooring, not to mention tearing down walls to expand a living area or installing a new bathroom. These costs obviously add up not only for those purchasing the home, but also potentially drive up home values in various neighborhoods or markets where the improvements are taking place.
Don’t get us wrong. Rising home values are a good thing. But if it places most homes outside the reach of millennials looking to start their families, that can only be a negative for furniture sales, particularly as many of these consumers say they’re in the market for furniture. Should our communities be focusing on developing more starter homes to address these needs?
Let us know what you think by responding to Home News Now Editor-in-Chief Tom Russell at tom@homenewsnow.com
