For many households, housing affordability moves farther away
A recent report from the National Association of Home Builders (NAHB) indicates that an overwhelming amount of U.S. households are priced out of buying a home.
According to the 2023 Price-Out Estimates report, 96.5 million households are not able to afford a median-priced new home.
This is in addition to 140,436 households that will be out of the picture if prices rise by another $1,000.
The NAHB says the minimum income required to purchase a $150,000 home at a mortgage rate of 6.25% is $45,672.63. In 2023, about 39 million households in the U.S. are estimated to have incomes less than the threshold and can only afford to buy homes priced at no more than $150,000.
Another 25.8 million can only afford to pay a top price of somewhere between $150,000 and $250,000.
The NAHB priced-out model uses the ability to qualify a mortgage to measure housing affordability, because most home buyers finance their new home purchase with conventional loans, and because convenient underwriting standards for these loans apply.
According to the association, the standard it adopts for its priced-out estimates is that the sum of the mortgage payment (including the principal amount, loan interest, property tax, homeowners’ property, and private mortgage insurance premiums (PITI), is no more than 28% of monthly gross household income.
Using the NAHB’s methodology, 39 million (about 31%) of the 126.7 million U.S. households can afford to buy a new median-priced home at $412,505 in 2022. But a $1,000 home price increase will take about 117,932 households out of the market.
For more information about the housing affordability crisis, read the full NAHB Priced-Out Estimates for 2022 report.
Both the NAHB and National Lumber and Building Material Dealers Association continue to lobby the White House and Congress over the issue of housing affordability and the need for corrective measures.
