In the first quarter of 2024, 38% of a typical household’s income was needed to make a mortgage payment on a median-priced, new single-family home in the U.S. That’s according to the Cost of Housing Index (CHI) unveiled Thursday by the National Association of Home Builders (NAHB) and Wells Fargo.
For low-income families, or those earning up to 50% of the area median income, the burden is even heavier, with 77% of their earnings needed for the same home.
These figures are slightly less but comparable for existing homes. A typical family needs to allocate 36% of its monthly income to afford a median-priced existing home, while low-income families must spend 71% of their earnings.
The NAHB/Wells Fargo CHI, a quarterly analysis of housing costs at both the national and metropolitan levels, measures the share of income needed to make a typical mortgage payment. This calculation includes median home prices, assuming a 10% down payment, as well as taxes, homeowners insurance and private mortgage insurance.
Median family income data is sourced from the U.S. Department of Housing and Urban Development (HUD). For the first quarter of 2024, the CHI is based on a national median new-home price of $420,800 and a median household income of $97,800, while the corresponding price for an existing home is $389,400.
“With a nationwide shortage of roughly 1.5 million homes, the lack of housing units is the primary cause of growing housing affordability challenges,” NAHB chief economist Robert Dietz said in a statement. “Policymakers at all levels of government need to enact policy changes that will allow builders to construct more homes, such as speeding up permit approval times, providing resources for skilled labor training and fixing building material supply chains.”
In Q1 2024, eight of 176 markets studied revealed that typical families were severely cost-burdened, spending more than 50% of their income on a median-priced existing home. In 80 markets, families needed to pay between 31% and 50% of their income. In the other 88 markets, homeowners can allocate 30% of their earnings or less to their mortgage.
San Jose topped the list as the most severely cost-burdened market, with 84% of a typical family’s income needed for a mortgage on an existing home. Honolulu (73%); Naples, Florida (71%); San Diego (70%); and San Francisco (69%) followed. In these markets, low-income families would need to spend between 138% and 168% of their income on a mortgage.
Conversely, the Illinois metros of Peoria and Decatur were the least cost-burdened markets, with families spending just 14% of their income on a mortgage for an existing home.
Other less burdened markets included Cumberland, Maryland (15%); Springfield, Illinois (16%); and Elmira, New York (16%). In these markets, low-income families would need to allocate between 28% and 32% of their income to cover a mortgage.
The CHI replaced the long-running NAHB/Wells Fargo Housing Opportunity Index at the end of 2023.
