Utah tops both the most and least affordable home ownership lists

A report in USA Today last month found Utah the most affordable state to live in. An analysis by BestBrokers, also last month, ranked the Beehive State as the third least affordable place to buy a home.

What gives?

“I’m confused by it as much as you are,” said Dejan Eskic, senior research fellow at the Kem C. Gardner Policy Institute at the University of Utah.

Basically, the two reports relied on different metrics to arrive at their rankings, with a key difference being existing homeowners versus new homebuyers.

Utah ranks consistently high on various lists of states where getting into a home is difficult because of high prices and high interest rates. The recent BestBrokers study ranked Utah behind only Hawaii and California for the least affordable states to buy a house.

Least affordable housing

Using data from Redfin, BestBrokers analyzed median home sale prices for all residential properties across the U.S. in 2023. To determine how much savings it would take the average American to buy a home in each state, it correlated those prices with per capita personal income figures for the third quarter of the same year using the U.S. Bureau of Economic Analysis. It then ranked the states based on home affordability, coming up with a list of the 10 most and least affordable states for prospective homebuyers.

But Eskic said the difference from top to bottom isn’t that great because things are tough all over.

“The margin between most affordable to the least affordable is not that wide because the whole country is unaffordable,” he said, questioning the validity of calling Utah the least affordable when states are so close together on that.

Eskic said he thinks some of the headlines on housing rankings are “kind of sensationalized.”

“To me, it’s like housing’s a hot topic,” he said. “A month ago, we’re Middle East experts, this month we’re bridge engineers.”

Most affordable state in the U.S.

Meanwhile, the USA Today study found that Utah is the most affordable state to live in, based on median income and homeownership costs, groceries, health care, income tax and gasoline. It defined affordability by looking at expenses as a percentage of the state’s median income.

Utahns spend the least percentage of their income on necessities (63.3%) and have the highest disposable income per capita ($32,732). Contributing to the state’s affordability is its median income of $89,168, coupled with the nation’s lowest health care spending at $6,213 annually, according to the report.

In addition to having the lowest health care costs, Utah ranked as fourth most affordable for homeowner costs as a percentage of income. Those costs include monthly mortgage and insurance payments, as well as any other home-related costs such as homeowners association fees, taxes and utilities. The report shows Utahns pay 24.5% of their income or $21,864 a year on homeowner costs. The state ranks 16th highest when looking at just homeownership costs.

But for a new homebuyer, the amount spent on a mortgage alone far exceeds that number. The average mortgage in Utah runs about $3,000 a month at current interest rates, putting it closer to $36,000 a year than $20,000, Eskic said.

“Buying a house is expensive. If you already have a house, you’re in pretty good shape,” he said.

Eskic said 85% of people with a mortgage have an interest rate lower than 5% and 72% have a rate lower than 4%. Also, the average equity in a home in Utah is 53%, which totals $265,000 on a half-million-dollar home, about the median price in the state.

Income disparity

One financial expert told KSL Newsradio that Utah fared well in the USA Today report because it looked at median income rather than average income.

“That shows that we have a pretty large group of people that need better employment,” said Shane Stewart, a certified financial planner with Deseret Mutual Benefit Association. “And it also could show we’ve got some people on the high end that are really high.”

Extreme highs and extreme lows can skew the results, he said.

“Them using median tells me they’re trying to paint a more rosy picture than it actually is,” Stewart said. “Most people in the real world will think, ‘Whoa, whoa. Am I even in the hunt here?’ Whereas if you use the average salary of about close to $50,000 here in Utah, you get a little better perspective on what that looks like and probably a more fair number to use.”

Eskic said he might use different data but the results are similar when it comes to housing affordability: “It still sucks.”