In the third quarter of 2024, the National Association of Home Builders (NAHB) and Wells Fargo released data indicating that a family earning the median income in the United States would need to allocate 38% of their earnings to afford a mortgage on a median-priced new home. For low-income families, defined as those earning half of the median income, this figure rises significantly to 75%.
The Cost of Housing Index (CHI) findings are consistent for both new and existing homes across the country. NAHB Chairman Carl Harris emphasized the seriousness of this issue, stating, "The Cost of Housing Index underscores the severity of the housing affordability crisis in countless communities across the nation." He added that NAHB's housing plan aims to address regulatory challenges and other barriers preventing home construction.
While there was no change in affordability for new homes between quarters, existing home affordability improved slightly. The CHI showed that median- and low-income families required 38% and 75% respectively for existing homes in Q3, compared to 39% and 79% in Q2.
NAHB Chief Economist Robert Dietz highlighted a shortage of approximately 1.5 million housing units as a significant factor affecting affordability. "In order to boost the nation’s housing supply, officials at all levels of government must work to eliminate barriers so that builders can build more attainable, affordable housing," he said.
The CHI measures housing costs based on factors such as median home prices and assumes a standard down payment. It also considers taxes, insurance, and private mortgage insurance (PMI). Data from HUD defines cost-burdened families as those spending over 30% of their income on housing.
Across various metropolitan areas, disparities were noted. In San Jose-Sunnyvale-Santa Clara, California, families face severe cost burdens with up to 85% of income needed for mortgages on existing homes. Conversely, Decatur, Illinois ranks as least burdened with only 16% required.
Low-income families face even steeper challenges in these markets. They would need between 127% and 170% of their income for mortgages in heavily burdened areas but only between 33% and 39% in less burdened regions like Decatur or Cumberland.
For more detailed information on specific metropolitan areas and further breakdowns by income level, visit nahb.org/chi.
