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

California homeowners may feel the sting of sustained inflation as they continue to spend the most significant percentage of their income on homeownership costs. 

The latest Consumer Price Index (CPI) released on August 10 demonstrates the massive imbalance of contributors to last month’s inflation – shelter costs being by and far the most significant factor subject to fluctuation. 

On the tail of this announcement, a new study by real estate website reveals that Californians spend the highest income ratio on home ownership, indicating that they stand to have the most savings from a rebalance of the economy. 

By analyzing census data, researchers identified the average yearly housing cost in each state proportionate to median income and revealed which states cost the most to own a home.

The study examines costs, including mortgage repayments, various insurances, property taxes, utility bills, fuel bills, mobile home costs, and condominium fees.

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. Californians spend, on average, 28.84% of their annual income on homeownership costs. This state’s median income of $84,097 translates into $24,252 yearly spending if you own a home. This news may incentivize Californians to look for alternative ways to make money.  

New York is not far behind, with a whopping 24.8% of expenses funneled to home costs. An income of $75,157 translates to $18,636 in home expenses per household. 

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 stands at 22.83% and Nevada at 22.51%. Each state may benefit from additional income to offset its costs until inflation balances out. 

Adding to the findings, 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. 

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

Forth 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

According to the latest Consumer Price Index released earlier this month, shelter costs contributed 90% of total inflation in July. However, Americans need not worry for long, as economic researchers at the Federal Reserve Bank of San Francisco predict a sharp turnaround ahead.

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

But Americans need to take their time to bring in more income, as incremental decreases (from 8.2% in March to today’s 7.7%) demonstrate a trend towards achieving balance once again. The San Francisco Fed researchers suggest we could see the most significant contraction in shelter inflation since the Global Financial Crisis of 2007 to 2009.

Aug 2023 – Consumer Index Data

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