Families Must Spend 38% of Their Income on House Payments

In another sign of America's ongoing housing affordability crisis, the National Association of Home Builders (NAHB)/Wells Fargo Cost of Housing Index (CHI) found that in the third quarter of 2024, a family earning the nation's median income of $97,800 needed 38% of its income to cover the mortgage payment on a median-priced new home. Low-income families, defined as those earning only 50% of median income, would have to spend 75% of their earnings to pay for the same new home.

The figures track identically for the purchase of existing homes in the U.S. as well. A typical family would have to pay 38% of their income for a median-priced existing home while a low-income family would need to pay 75% of their earnings to make the same mortgage payment.

"The Cost of Housing Index underscores the severity of the housing affordability crisis in countless communities across the nation," said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. "NAHB's 10-point housing plan directly addresses this critical issue by focusing on the need to tackle burdensome regulations, permitting roadblocks, inefficient building material supply chains and other factors that are preventing builders from constructing additional homes that our nation desperately needs."

There was no change in the percentage of a family's income needed to purchase a new home (38%) between the second and third quarters of 2024, but affordability did improve slightly for low-income families, falling from 77% to 75%.

Meanwhile, affordability of existing homes edged higher for both median- and low-income families between the second and third quarter. The CHI indices were 38% and 75% in the third quarter vs. 39% and 79%, respectively, in the second quarter.

"With the nation facing a shortfall of roughly 1.5 million housing units, the latest CHI data clearly illustrate that a lack of housing is making it difficult for American families to afford to purchase a home," said NAHB Chief Economist Robert Dietz. "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."

The NAHB/Wells Fargo Cost of Housing Index, or CHI, is a quarterly analysis of housing costs in the U.S. and at the metropolitan area level. The CHI represents the share of a typical family's income needed to make a typical mortgage payment. The mortgage payment is calculated by taking median home prices, assuming a 10% down payment, and adding taxes, insurance and PMI. Median family income is published by the Department of Housing and Urban Development. A low-income CHI is also calculated for families earning only 50% of the area's median income.

The U.S. data for the percentage of earnings needed to purchase a new home in the third quarter is based on a national median new home price of $420,400 and median income of $97,800. The third quarter median new home price is up from $412,300 in the second quarter. The corresponding price for an existing home in the third quarter is 418,700, down from $422,100 in the previous quarter. The average 30-year mortgage rate fell from 7.08% in the second quarter to 6.60% in the third quarter.

HUD defines cost-burdened families as those "who pay more than 30% of their income for housing" and a severe cost burden is defined as paying more than 50% of one's income on housing.

The CHI breaks down the percentage of a family's income needed to make a mortgage payment on an existing home in 176 metropolitan areas based on the local median home price and median income. Percentages are also calculated for low-income families in all of these markets.

In 10 out of 176 markets in the third quarter, the typical family is severely cost-burdened (must pay more than 50% of their income on a median-priced existing home). In 85 other markets, such families are cost-burdened (need to pay between 31% and 50%). There are 81 markets where the CHI is 30% of earnings or lower.

The Top 5 Severely Cost-Burdened Markets

San Jose-Sunnyvale-Santa Clara, Calif., was the most severely cost-burdened market on the CHI, where 85% of a typical family's income is needed to make a mortgage payment on an existing home. This was followed by:

• Urban Honolulu, Hawaii (75%)
• San Diego-Chula Vista-Carlsbad, Calif. (70%)
• San Francisco-Oakland-Berkeley, Calif. (68%)
• Miami-Fort Lauderdale-Pompano Beach, Fla. (63%)

Low-income families would have to pay between 127% and 170% of their income in all five of the above markets to cover a mortgage.

The Top 5 Least Cost-Burdened Markets

By contrast, Decatur, Ill., was the least cost-burdened markets on the CHI, where typical families needed to spend just 16% of their income to pay for a mortgage on an existing home. Rounding out the least burdened markets are:

• Cumberland, Md.-W.Va. (18%)
• Springfield, Ill. (18%)
• Elmira, N.Y. (19%)
• Peoria, Ill. (19%)

Low-income families in these markets would have to pay between 33% and 39% of their income to cover the mortgage payment for a median-priced existing home.

Please visit nahb.org/chi for tables and details.

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