The purchasing power of homebuyers heavily influences the type of property they can afford, with regional differences in income significantly affecting their options. Across various parts of the United States, income levels dictate the scale of homeownership potential.

The U.S. Bureau of Labor Statistics recently released data on average hourly wages by state, which have a profound impact on housing markets across the country.

“Salaries underpin affordability, shaped largely by demand,” explains Ben Mizes, a real estate agent and co-founder of Clever Offers, in a discussion with Realtor.com®. “Higher average earnings mean more individuals can qualify for mortgages, leading to increased competition in the market.”

This heightened competition often results in rising property prices.

“There’s a direct relationship between local income levels and real estate values,” notes Bruce Ailion, an attorney and real estate expert with Re/Max Town & Country in Atlanta. “As incomes rise, so do home prices.”

Conversely, lower wages limit how many can buy, which can keep prices from rising.

Greater earnings give you more choices

If someone has more income to spend, that can work in their favor in a number of ways.

“Depending on where they’re buying, they can get more space, mountain or coastal views, or a better location,” Cara Ameer, a real estate agent with Coldwell Banker who is licensed in Florida and California, explains to Realtor.com.

When you earn a higher wage, you typically have more options—but not always.

“You could have a situation in a high-income area where your salary is above average nationally but still not enough to afford local housing,” says Martin Orefice, founder of Rent to Own Labs in Orlando, FL.

That’s because high-earning states face severe affordability gaps, according to Hannah Jones, senior economic research analyst at Realtor.com.

“In top-income states, soaring housing costs outpace wage growth, dampening affordability and contributing to lower homeownership rates,” says Jones.

Lower average wages give investors an edge

In places where people earn less, homes usually cost less, too.

“Despite lower incomes, many of the nation’s lowest-earning states offer better housing alignment with wages than top-earning states do,” says Jones.

However, in today’s climate, it can still be difficult for local buyers to break into the market—which is when investors step in.

“We buy homes in these areas because they’re less expensive and there’s still a need for affordable housing,” says real estate agent and investor Ron Myers. “A lot of us believe that as wages slowly go up, home values will go up, too.”

States with the highest average wages

“On average, the nation’s highest-earning states fare worse on housing affordability than the lowest-earning ones,” says Jones.

Minnesota stands out as an exception, combining one of the highest average hourly wages with home prices below the maximum affordable level.

“In contrast, California and Massachusetts perform far worse, with typical home prices roughly 70% higher than what local wages can comfortably support,” says Jones.

Here’s a look at the five states that lead the nation in average pay, along with how much homebuyers there can afford using the “30% rule,” which recommends they spend no more than 30% of their income on a house.

1. Washington, DC

Average hourly wage: $54.23

Median home listing price: $584,975

Max home price a worker at average hourly wage would be able to afford (with 20% down): $574,314

Price difference: 1.9%

2. Washington

Average hourly wage: $42.30

Median home listing price: $639,975

Max home price a worker at average hourly wage would be able to afford (with 20% down): $447,971

Price difference: 42.9%

3. Massachusetts

Average hourly wage: $41.74

Median home listing price: $749,450

Max home price a worker at average hourly wage would be able to afford (with 20% down): $442,040

Price difference: 69.5%

4. California

Average hourly wage: $41.09

Median home listing price: $740,368

Max home price a worker at average hourly wage would be able to afford (with 20% down): $435,157

Price difference: 70.1%

5. Minnesota

Average hourly wage: $39.53

Median home listing price: $379,950

Max home price a worker at average hourly wage would be able to afford (with 20% down): $418,636

Price difference: -9.2%

States with the lowest average wages

Among the lowest-earning states, nearly all, with the exception of New Mexico, have home prices at or below affordable levels based on local incomes.

“In general, higher-wage states also have significantly higher home prices, while lower-wage states tend to see home values more in line with local earning power,” says Jones.

Here’s where average wages are the lowest, along with how much homebuyers could afford according to the 30% rule.

1. Mississippi

Average hourly wage: $28.10

Median home listing price: $299,000

Max home price a worker at average hourly wage would be able to afford (with 20% down): $297,588

Price difference: 0.5%

2. New Mexico

Average hourly wage: $29.14

Median home listing price: $399,900

Max home price a worker at average hourly wage would be able to afford (with 20% down): $308,602

Price difference: 29.6%

3. Arkansas

Average hourly wage: $29.62

Median home listing price: $305,750

Max home price a worker at average hourly wage would be able to afford (with 20% down): $313,686

Price difference: -2.5%

4. Louisiana

Average hourly wage: $29.71

Median home listing price: $275,750

Max home price a worker at average hourly wage would be able to afford (with 20% down): $314,639

Price difference: -12.4%

5. West Virginia

Average hourly wage: $29.88

Median home listing price: $257,000

Max home price a worker at average hourly wage would be able to afford (with 20% down): $316,439

Price difference: -18.8%