How Long Does It Take To Pay Off A Mortgage In Each State?
Written by Kyle Mayers
July 30, 2018 |
Home ownership can be challenging. However, in the most affordable states, paying off a mortgage takes only 8 years.
Financial freedom and mortgage freedom are linked. A mortgage that commands 20% of your income is a huge barnacle to carry. The sooner that barnacle is removed, the sooner you have the opportunity to either save for retirement, or actually retire. The 20% devoted to mortgage payments comes from net pay, or pay after payroll deductions like benefits payments, health insurance and taxes.
The differences between states can be drastic. The length of time an average worker will take to pay for an average home is 8.94 years in Iowa. In California, the same average worker paying of an average home will take 22 years to pay it off. The reason is that although the average worker in California commands an annual income that is greater than an average worker in Iowa ($58,272.00 in California versus $45,996.00 in Iowa), home prices in Iowa are significantly lower ($110,118.69 in Iowa versus $531,114.85).
Extremely high and out of reach home prices also affect the quality of the homes buyers choose. In California, with average home prices at $531,114.85, some buyers are forced to more of the fringe of the market in their effort to pursue home ownership. This fringe includes home products such as condominiums and townhouses. Obviously, these are still homes, but in states such as Iowa, home ownership is much more likely to be in a detached home than a condo. In California, 7.7% of all real estate units are condominiums. In Iowa, that ratio is just 1.2%. Further, the 10 year growth rate of condominium construction in California at 101.0% outpaces that of Iowa at just 68.3%. Not only do workers in California pay more for a fringe home than those in Iowa, that trend will get worse over time.
The fact that some states require home owners to pay for mortgages for a longer duration than others indicates that wages in those states with higher priced homes have not kept up. Although there are may factors that dictate market based wages, the role of government also plays a major factor. States with higher wages relative to home prices very likely are states whose job creation and maintenance strategies are both forward looking and mature. Volatility in the job market fractures a worker's ability to earn a consistent annual income. That instability means that paying down a large purchase like that of a home is more difficult. Iowa benefits from being a central hub with many agricultural options. But Iowa also recognize the value of labor for the purpose of generating productivity. In California, it is an exaggeration to say that silicon valley and Hollywood dominate the workforce, but industries that make success seem easy do influence the character of governing bodies. Further, in cases where automation created within Silicon Valley actually does as s expected, jobs get displaced. California may benefit from technological advancements more than other states, but their workforce may be paying a higher price.
Summary
Home ownership is more of a reality depending on the state in which you choose to become a homeowner. In Iowa, the average worker will take 8.94 years to fully own a home. In California, that duration jumps to 22 years! Home prices in California are significantly higher than many states and consequently the nature of real estate is shifting within its borders. Fringe real estate options such as condominiums and townhouses are being constructed at a rate higher than that of more affordable states such as Iowa. With home prices disproportionately high relative to wages, the root cause may be state government oversight on labor market conditions. Healthy states like Iowa may have government oversight that leads to job creation and maintenance, whereas states like California may be subject to influences that help erode job creation efforts.
Do you have a home you cannot afford? Have you paid off your home? How long did it take? Do you live in a state with a low or high duration of home mortgage repayment?