In the first quarter of 2024, 38% of a typical family’s income was needed to make a mortgage payment on a median-priced new single-family home, according to a new quarterly Cost of Housing Index from the NAHB and Wells Fargo.
Low-income families—defined as those earning only 50% of the area’s median income—would have to spend 77% of their earnings to pay for the same median priced new home. The analysis indicates a majority of families are cost-burdened as defined by the U.S. Department of Housing and Urban Development (HUD), needing more than 30% of their income for housing. A severe cost burden is defined by HUD as paying more than 50% of one’s income on housing.
“The Cost of Housing Index clearly shows that a growing shortage of affordable housing is hurting families and communities nationwide and that local, state, and federal officials must act on this issue,” says NAHB chairman Carl Harris.
The same trend is present for existing homes: a typical family would have to pay 36% of their income for a median priced existing home while a low-income family would need to pay 71% of their earnings to make the same mortgage payment.
“With a nationwide shortage of roughly 1.5 million homes, the lack of housing units is the primary cause of growing affordability challenges,” NAHB chief economist Robert Dietz says. “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.”
The Cost of Housing Index breaks down the percentage of a family’s income needed to make a mortgage payment in 176 metro areas based on the local median home price and median income. In eight of 176 markets in the first quarter, the typical family is severely cost burdened. In a further 80 markets, the typical family is cost-burdened and in 88 markets where the typical family needs to pay less than 30% of their income on housing payments.
The most severely cost burdened markets in the first quarter are: San Jose-Sunnyvale-Santa Clara, California; Urban Honolulu, Hawaii; Naples-Marco Island, Florida; San Diego-Chula Vista-Carlsbad, California; and San Francisco-Oakland-Berkley, California.
Conversely, the least cost burdened markets are Peoria, Illinois; Decatur, Illinois; Cumberland, Maryland-West Virginia; Springfield, Illinois; and Elmira, New York.