More than three-quarters of the nation’s households are unable to afford a median-priced home, according to NAHB’s updated priced out analysis. Approximately 103.5 million households—76.5% of all U.S. households—cannot afford a home priced at $435,750.
According to the analysis, a $1,000 increase in the median price of a new home would make home buying unaffordable for an additional 106,031 households of the market. Further, a 25-basis point increase in the 30-year fixed mortgage rate (assumed to be 6.5% for the study) would price out 1.1 million households.
For the purposes of the study, the NAHB priced out model uses the ability to qualify for a mortgage as a proxy for housing affordability. The standard adopted by the organization is the sum of the mortgage payment—including the principal, loan interest, property tax, homeowners’ property and private mortgage insurance premiums—is no more than 28% of monthly gross household income. Key assumptions include a 10% down payment, a 30-year fixed rate mortgage of 6.5%, and an annual premium starting at 73 basis points for private mortgage insurance.
Following the model, the minimum income required to purchase a $495,750 new home is $151,947.
The minimum income required to purchase a $150,000 home is $45,975. About 40.5 million households are estimated to earn no more than that threshold and are unable to afford a home priced higher than $150,000.
On a state level, Vermont has the highest share of households unable to afford the median-priced home, with approximately 92% of its households falling short of the income requirement. Similarly, Connecticut and Hawaii have 89% and 88.5% of households unable to afford the median priced home. Conversely, Virginia has better affordability, with the median-priced home of $462,000 only unaffordable to 66% of its households.
The San Jose-Sunnyvale-Santa Clara in California has the highest median home price ($1,685,593) and requires the highest minimum household income ($487,773) to purchase a home. The metro area is unaffordable for 92.6% of its households. Conversely, Washington, D.C. is a more accessible market and is affordable for 37% of households in the metro area.
