Housing Affordability Challenges Persist

Latest Data Reveals Cost Burdens for Homebuyers.

The latest National Association of Home Builders (NAHB)/Wells Fargo Cost of Housing Index (CHI) underscores the ongoing affordability challenges in today’s housing market. In the fourth quarter of 2024, a household earning the national median income of $97,800 needed to allocate 38% of its earnings to cover the mortgage payment on a median-priced new home.

For low-income families—those earning just 50% of the median income—the burden is significantly higher, requiring 76% of their earnings to afford the same home. The affordability gap extends to existing homes as well, with the typical family spending 37% of their income on a mortgage, while low-income families would need 74% of their earnings to cover the same cost.

Small Shifts in Housing Costs

While the percentage of income required to afford a new home remained unchanged from the third to the fourth quarter of 2024, the cost burden for low-income families increased slightly from 75% to 76%. Meanwhile, the affordability of existing homes saw a slight improvement, with the cost burden easing from 38% to 37% for median-income families and from 75% to 74% for low-income buyers. This modest relief came as median existing home prices declined by 2%quarter-over-quarter.

Regional Variations in Housing Affordability

Affordability challenges are even more pronounced in certain metropolitan areas. The CHI tracks affordability across 176 metro markets, revealing that:

• 10 markets are classified as severely cost-burdened, where the typical family must spend more than 50% of their income on a median-priced home.

• 85 markets fall into the cost-burdened category, requiring families to spend 31% to 50% of their earnings on housing.

• 81 markets remain relatively affordable, with CHI levels at 30% or below.

What This Means for Homebuyers

These findings highlight the continued strain on affordability in today’s market, making it crucial for prospective buyers to explore all available financing options, including down payment assistance programs and competitive mortgage solutions. As affordability shifts in different regions, working with a knowledgeable mortgage professional can help buyers navigate their best path to homeownership.

If you’re considering purchasing a home, let’s discuss strategies to make your mortgage work for your financial situation. Contact us today to explore your options!