Housing affordability crisis is getting worse, homebuilders warn

The latest National Association of Home Builders/Wells Fargo Cost of Housing Index (CHI) shows that American families are increasingly burdened by housing costs. The report for the fourth quarter of 2024 found that a family earning the median national income of $97,800 must allocate 38% of its income to pay the mortgage on a median-priced new home. 

For low-income families, defined as those earning only 50% of the median income, this figure rises dramatically to 76%.

The affordability challenges extend to existing homes as well, with typical families needing to spend 37% of their income on mortgage payments, while low-income families face a 74% income allocation for the same purpose. 

This situation underscores the urgent need for policy interventions to address the housing affordability crisis, according to NAHB Chairman Carl Harris. He said eliminating regulatory barriers that hinder the construction of new homes and apartments could provide relief.

Despite no change in the percentage of income needed for new homes between the third and fourth quarters of 2024, affordability for low-income families has slightly worsened. The CHI for existing homes shows a minor improvement in affordability due to a 2% decrease in median existing home prices from the third to the fourth quarter of 2024.

Regulatory impediments

NAHB Chief Economist Robert Dietz said policymakers need to remove regulatory impediments and foster a better business climate to enable the construction of more affordable housing. The CHI, a quarterly analysis, highlights the share of a typical family's income required for mortgage payments, factoring in median home prices, taxes, insurance, and PMI.

The report identifies San Jose-Sunnyvale-Santa Clara, California, as the most severely cost-burdened market, where families need 87% of their income for mortgage payments on existing homes. Other severely burdened markets include Urban Honolulu and San Diego-Chula Vista-Carlsbad, Calif. 

Decatur, Ill., emerges as the least cost-burdened market, with families spending just 16% of their income on housing.