REAL ESTATE NEWS

Hawaii households are now directing roughly half of their monthly income to keeping a roof over their heads, a housing-cost burden that sharply contrasts with the sub-20% share seen in parts of the Midwest, according to a new WalletHub analysis of state-level housing spend.

For investors who traffic in spreads between high-cost and low-cost markets, the report's state-by-state breakdown of homeowner and renter outlays offers a granular look at where housing costs are consuming the most income – and where there may still be room to run.

Homeowners: Hawaii and California at the Top of the Burden Table

WalletHub's rankings show Hawaii as the most expensive state for homeowners when measured as a share of median monthly household income. Homeowners are spending about 50% of their income on housing, a level that effectively crowds out other discretionary spending and leaves little cushion against rate or tax shocks. California ranks second, with homeowners devoting roughly 43% of their median income to mortgage and home-energy costs.

Massachusetts, Oregon and Washington round out the top tier of homeowner cost burden. In Massachusetts and Oregon, homeowners are spending in the mid-30% range of income on housing, while Washington ranks fifth nationally on WalletHub's measure of owner costs as a share of median income. These markets combine elevated price levels with substantial energy and tax burdens, magnifying the share of income that flows to shelter, even before repairs and association fees.

At the other end, Iowa ranks as the most affordable state for homeowners on a relative basis, with households there putting closer to 17% of income toward mortgage and home energy payments. Other lower-burden states cluster in the South and Midwest, where owner costs generally fall near or below 20% of income, according to WalletHub's tabulation of state medians. Kentucky, Mississippi and Arkansas appear in the bottom portion of the list, with homeowner cost shares hovering around 20% or slightly below.

For investors, the divergence between a 50% homeowner burden in Hawaii and sub-20% in the Midwest underscores two very different risk profiles. In high-burden states, household balance sheets are more exposed to shocks in taxes, insurance and utilities, raising questions about long-term payment resilience and the political appetite for additional housing costs. In low-burden states, the same WalletHub data suggest more headroom for future price and cost increases before households hit the 30%–plus "cost-burdened" threshold commonly cited in affordability discussions.

Renters: New York at the Top, Kansas at the Bottom

WalletHub's renter rankings tell a parallel but distinct story. New York emerges as the most expensive state for renters when housing costs are measured against median monthly income, reflecting a combination of high nominal rents and modest incomes outside a handful of affluent submarkets. Kansas sits at the opposite end of the list as the least expensive state for renters, giving it a very different affordability profile, even if top-line rent growth has been solid.

Washington, a top-five state for homeowner cost burden, drops to 18th when WalletHub ranks states by renter housing spend as a share of income. That split highlights a meaningful structural difference between ownership and rental cost dynamics in some coastal markets, where ownership is significantly more stretched.

The broader national picture, as reflected in related Census data, shows median gross rent at roughly 31% of renter income, compared with around 21% for homeowners with a mortgage. WalletHub's state-level analysis fits into that pattern: tenants, especially in high-cost states like New York, are more likely to cross the 30% cost-burden threshold, while renters in states like Kansas remain below it by a comparatively wide margin.

For multifamily and single-family rental investors, the spread between New York and Kansas on WalletHub's chart illustrates the difference between markets where rent-to-income ratios may be nearing practical ceilings and those where landlords may have more pricing latitude without immediately over-burdening tenants. The fact that Washington is materially less stressed on the renter side than on the owner side also hints at markets where rentership could remain an attractive alternative to ownership over the medium term.

Methodology: Housing Costs as a Share of Median Income

WalletHub's analysis aggregates three cost components at the state level – rent, mortgage payments and home-energy expenses – and compares the combined housing outlay against each state's median household income. The result is a ranking based on housing costs as a share of income rather than on nominal prices or absolute payment levels.

This approach matters for investors because it pushes the focus beyond price per square foot or headline rent to the actual carrying capacity of the local household base. States that look expensive on a nominal basis can still be relatively manageable if incomes are high enough, while markets with moderate-looking rents or home prices can seem like a high burden if incomes are weak.

WalletHub's homeowner and renter rankings are derived from the same framework but presented separately, allowing direct comparisons of the cost burden on owners and tenants within and across states. In Washington, for example, this split yields a top-five position on the owner side but only an 18th-place ranking on the renter side. In Hawaii and California, by contrast, high landlord housing cost shares are paired with similarly elevated burdens on the tenant side.

What the Spreads Signal for Investors

Taken together, WalletHub's charts describe a map of relative stress and resilience that goes beyond the usual high-cost-coast versus low-cost-heartland narrative.

Hawaii's 50% homeowner burden and California's 43% figure point to markets where households have limited capacity to absorb further increases in mortgage, tax or utility costs without curbing consumption elsewhere. New York's position at the top of the renter burden list suggests similar limits on rent growth absent strong income gains or shifts in household composition.

By contrast, Iowa's sub-20% homeowner cost share and Kansas's relatively low renter burden profile state that, at least at today's medians, they still have measurable headroom before hitting levels that typically trigger widespread affordability concerns. For equity investors, lenders and developers, that gap may translate into different underwriting assumptions on rent growth, expense pass-throughs and default risk across the two ends of the WalletHub rankings.

The report also reinforces a point that has become familiar over the last several years: housing costs have risen sharply, but the impact is uneven. Some coastal and tourist-driven states now require households to give up one-third to one-half of their income to stay sheltered, while parts of the Midwest and South remain closer to the traditional affordability benchmarks commonly used in underwriting.

For commercial real estate investors, WalletHub's data does not answer the question of where to deploy capital, but they do sharpen the picture of where housing costs are already pressing hard against incomes – and where there may still be room for both rents and prices to grow before they hit that wall.

Source: GlobeSt/ALM