NAHB: It Takes 38 Percent of the National Median Income to Afford a Median-Priced New Home

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It currently takes about 38% of a typical family’s income to make a mortgage payment on a median-priced new single-family home in the U.S., a report from the National Association of Home Builders (NAHB) and Wells Fargo shows.

Low-income families, defined as those earning only 50% of an area’s median income, would have to spend 77% of their earnings to pay for the same new home, according to the report.

The figures track closely for the purchase of existing homes in the U.S. as well. 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.

“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 Carl Harris, chairman of NAHB, in a release.

“NAHB has released a 10-point plan to tackle the housing affordability crisis that focuses on the need to address excessive regulations, inefficient local zoning rules, costly building codes, and many other factors that are dramatically affecting home prices and preventing builders from constructing more attainable, affordable housing.”

“With a nationwide shortage of roughly 1.5 million homes, the lack of housing units is the primary cause of growing housing affordability challenges,” says Robert Dietz, chief economist for NAHB. “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 percentage of earnings needed to purchase a new home in the first quarter is based on a national median new home price of $420,800 and median income of $97,800.

The corresponding price for an existing home is $389,400.

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.

In eight out of 176 markets in the first quarter, the typical family is severely cost-burdened – i.e., must pay more than 50% of their income on a median-priced existing home.

In 80 other markets, such families are cost-burdened – i.e., need to pay between 31% and 50%.

There are 88 markets where the CHI is 30% of earnings or lower.

The top 5 severely cost-burdened markets include San Jose-Sunnyvale-Santa Clara, Calif., where 84% of a typical family’s income is needed to make a mortgage payment on an existing home; followed by Urban Honolulu, Hawaii (73%); Naples-Marco Island, Fla. (71%); San Diego-Chula Vista-Carlsbad, Calif. 70%: and San Francisco-Oakland-Berkeley, Calif. (69%).

The top 5 least cost-burdened markets in the first quarter included Peoria and Decatur, Ill. (tied), where families needed to spend just 14% of their income to pay for a mortgage on an existing home; followed by Cumberland, Md.-W.Va (15%); Springfield, Ill. (16%); Elmira, N.Y. (16%).

Low-income families in these markets would have to pay between 28% and 32% of their income to cover the mortgage payment for a median-priced existing home.

Photo: Amanda Smith

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