Steep Prices Strain Borrowers & Depress Homeownership in Expensive States
The New York Fed recently released its Household Debt and Credit report for Q4 2018, indicating the status of aggregate household debt in the U.S. The report shows that by the end of 2018, household debt reached a new peak of $13.54 trillion dollars, a 0.2 percent increase from Q3 2018 and $869 billion higher than the previous peak at the onset of the Great Recession in Q3 2008. The New York Fed breaks down household debt into five main categories: housing debt (mortgages), student loans, auto loans, credit card debt, and “other.”
While non-housing debt increased $58 billion in the fourth quarter, housing debt saw a slight decrease from Q3 2018, bucking the usual trend. Similarly, the percentage of homeowners in serious delinquency (90+ days late) on their mortgage payments has been steadily decreasing since 2010. According to the New York Fed, the percent of mortgage debt balance 90+ days delinquent is currently at 1.1 percent.
Although these numbers offer a high-level overview of housing debt and delinquency at the national level, housing debt varies significantly based on factors such as salary and home prices, both of which are tightly coupled with location. To better compare housing debt across states, it’s useful to use a debt-to-income ratio rather than just aggregate numbers as reported by the Fed.
Intuitively, it seems that the more someone makes, the less that person would spend on housing as a percentage of income. But at the state level, wages fail to keep pace with even steeper home prices in expensive states. Even though incomes are slightly higher in high-home-price states, debt relative to income and housing costs relative to income are also higher. This means people in expensive, high-income states, such as those in the Northeast and on the West Coast, are more likely to take on high levels of debt than people in less expensive, low-income states, such as those in the South and Midwest.
Similarly, homeownership rates in higher-income states are lower because home prices in those states are so much higher. For people considering a move to raise their salary, steeper home prices could very well offset all of the gains (and then some) of the higher salary.
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Among states, delinquency rates are not correlated with debt-to-income ratio, meaning states whose residents accumulate more debt relative to income aren’t more likely to have higher default rates. It’s likely that other factors like job stability, liquidity, and spending habits contribute more to delinquencies than debt as a percentage of income.
To better understand which states have the most mortgage debt, Construction Coverage calculated each state’s debt-to-income ratio using debt statistics from the New York Fed, as well as housing, income, and homeownership data from the U.S. Census Bureau. Construction Coverage found that the states with the most housing debt relative to income are located on the West Coast, the Southwest, and the Mid-Atlantic region. All of the states listed below have a mortgage debt-to-income ratio that’s higher than the national average.
States With the Most Debt Relative to Income
16. New Mexico
- Debt/income ratio: 2.09
- Median home value for household w/ mortgage: $189,300
- Average mortgage debt for households w/ mortgage: $149,136
- Median income for households w/ mortgage: $71,319
- Monthly housing costs for households w/ mortgage: $1,244
- Homeownership rate: 67.92%
- Delinquency rate: 1.47%
15. Delaware
- Debt/income ratio: 2.11
- Median home value for household w/ mortgage: $258,900
- Average mortgage debt for households w/ mortgage: $184,580
- Median income for households w/ mortgage: $87,389
- Monthly housing costs for households w/ mortgage: $1,507
- Homeownership rate: 70.95%
- Delinquency rate: 1.86%
14. Alaska
- Debt/income ratio: 2.17
- Median home value for household w/ mortgage: $286,900
- Average mortgage debt for households w/ mortgage: $225,204
- Median income for households w/ mortgage: $103,942
- Monthly housing costs for households w/ mortgage: $1,844
- Homeownership rate: 63.55%
- Delinquency rate: 0.54%
13. Maryland
- Debt/income ratio: 2.19
- Median home value for household w/ mortgage: $323,400
- Average mortgage debt for households w/ mortgage: $244,590
- Median income for households w/ mortgage: $111,824
- Monthly housing costs for households w/ mortgage: $1,915
- Homeownership rate: 66.71%
- Delinquency rate: 1.37%
12. Idaho
- Debt/income ratio: 2.25
- Median home value for household w/ mortgage: $214,200
- Average mortgage debt for households w/ mortgage: $159,218
- Median income for households w/ mortgage: $70,758
- Monthly housing costs for households w/ mortgage: $1,213
- Homeownership rate: 69.66%
- Delinquency rate: 0.49%
11. Utah
- Debt/income ratio: 2.30
- Median home value for household w/ mortgage: $279,100
- Average mortgage debt for households w/ mortgage: $205,926
- Median income for households w/ mortgage: $89,342
- Monthly housing costs for households w/ mortgage: $1,467
- Homeownership rate: 69.87%
- Delinquency rate: 0.51%
10. Virginia
- Debt/income ratio: 2.33
- Median home value for household w/ mortgage: $297,000
- Average mortgage debt for households w/ mortgage: $235,799
- Median income for households w/ mortgage: $101,119
- Monthly housing costs for households w/ mortgage: $1,718
- Homeownership rate: 66.57%
- Delinquency rate: 0.72%
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9. Arizona
- Debt/income ratio: 2.33
- Median home value for household w/ mortgage: $238,800
- Average mortgage debt for households w/ mortgage: $188,752
- Median income for households w/ mortgage: $80,853
- Monthly housing costs for households w/ mortgage: $1,365
- Homeownership rate: 64.72%
- Delinquency rate: 0.64%
8. Oregon
- Debt/income ratio: 2.34
- Median home value for household w/ mortgage: $332,400
- Average mortgage debt for households w/ mortgage: $205,314
- Median income for households w/ mortgage: $87,879
- Monthly housing costs for households w/ mortgage: $1,629
- Homeownership rate: 62.80%
- Delinquency rate: 0.56%
7. Florida
- Debt/income ratio: 2.37
- Median home value for household w/ mortgage: $232,100
- Average mortgage debt for households w/ mortgage: $181,950
- Median income for households w/ mortgage: $76,655
- Monthly housing costs for households w/ mortgage: $1,423
- Homeownership rate: 65.15%
- Delinquency rate: 1.63%
6. Colorado
- Debt/income ratio: 2.47
- Median home value for household w/ mortgage: $357,700
- Average mortgage debt for households w/ mortgage: $240,384
- Median income for households w/ mortgage: $97,207
- Monthly housing costs for households w/ mortgage: $1,681
- Homeownership rate: 65.20%
- Delinquency rate: 0.39%
5. Washington
- Debt/income ratio: 2.48
- Median home value for household w/ mortgage: $352,100
- Average mortgage debt for households w/ mortgage: $249,544
- Median income for households w/ mortgage: $100,562
- Monthly housing costs for households w/ mortgage: $1,806
- Homeownership rate: 62.79%
- Delinquency rate: 0.55%
4. Nevada
- Debt/income ratio: 2.62
- Median home value for household w/ mortgage: $266,000
- Average mortgage debt for households w/ mortgage: $214,442
- Median income for households w/ mortgage: $81,726
- Monthly housing costs for households w/ mortgage: $1,428
- Homeownership rate: 56.58%
- Delinquency rate: 1.18%
3. District of Columbia
- Debt/income ratio: 2.80
- Median home value for household w/ mortgage: $609,900
- Average mortgage debt for households w/ mortgage: $388,815
- Median income for households w/ mortgage: $138,977
- Monthly housing costs for households w/ mortgage: $2,432
- Homeownership rate: 42.21%
- Delinquency rate: 0.83%
2. Hawaii
- Debt/income ratio: 3.15
- Median home value for household w/ mortgage: $628,300
- Average mortgage debt for households w/ mortgage: $354,404
- Median income for households w/ mortgage: $112,506
- Monthly housing costs for households w/ mortgage: $2,337
- Homeownership rate: 58.52%
- Delinquency rate: 1.09%
1. California
- Debt/income ratio: 3.21
- Median home value for household w/ mortgage: $529,000
- Average mortgage debt for households w/ mortgage: $348,551
- Median income for households w/ mortgage: $108,609
- Monthly housing costs for households w/ mortgage: $2,269
- Homeownership rate: 54.79%
- Delinquency rate: 0.57%
Methodology & Full Results
The mortgage debt and delinquency data used in this analysis is from the Federal Reserve Bank of New York Household Debt Statistics for Q4 2018. Homeownership, income, housing costs, and home values are from the U.S. Census Bureau 2017 American Community Survey (ACS) 1-Year Estimates.
For each state, the average mortgage debt for households with a mortgage was calculated by dividing the total amount of mortgage debt for that state by the total number of owner-occupied housing units with a mortgage. The resulting statistics was then divided by the median household income for owner-occupied housing units with a mortgage to derive the debt-to-income ratio. Monthly housing costs for households with a mortgage and homeownership rates are provided directly by the ACS.
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