Ongoing challenges related to housing affordability is having a profound impact on how Americans are living, planning, and budgeting for their futures, according to an analysis published by the NAHB. The challenges facing renters and prospective homeowners alike are likely to only become more significant, with the Harvard University Joint Center for Housing Studies’ recent State of the Nation’s Housing 2024 report finding home prices and rent have increased 26% and 47%, respectively, since the onset of the pandemic.
According to the NAHB’s Cost of Housing Index (CHI), 38% of a typical home’s income is needed to make a mortgage payment on the median-priced U.S. home. Low-income families—those earning only 50% of the median income—have to spend more than three-quarters of their income to pay for the same median-priced home.
The existing-home market is not providing much respite, with median prices hitting an all-time high last month. A typical family has to pay 36% of their income for a median-priced existing home, according to the NAHB; a low-income family needs to pay 71% to make the same mortgage payment. Further compounding affordability challenges is the reality that the household income for 103.5 million U.S. households is insufficient to afford a median-priced new home ($495,750), according to the NAHB.
According to the CHI, eight of 176 analyzed metro areas are “severely cost-burdened,” meaning over half of a typical family’s income is needed to pay for a mortgage on a median-priced existing home. Eighty other markets were considered “cost-burdened,” indicating households needed to spend between 31% and 50% of their income on a home. Three of the most cost-burdened metros are located in California, consistent with the general trend of coastal areas having significantly higher home prices than central markets. Applying the same analysis, the NAHB determined half of all renter households were also cost-burdened, the highest share on record.
In addition to insufficient inventory, the NAHB indicates regulation is another major factor contributing to housing affordability. Regulations account for nearly 25% of the cost of a single-family home and more than 40% of a typical apartment development. The high cost of building materials, a shortage of skilled labor, and the struggle to pass tax legislation are other factors contributing to affordability challenges.
The NAHB analysis is part of an organizational effort to address housing affordability, outlined by the recently published 10-point housing plan to remove barriers that slow construction.
