The True Cost Of Housing In America

Cost of housing
The cost of housing continues to provide headwinds for the real estate market.

For many Americans, the dream of home ownership comes with a big question: how much can I realistically afford? A new tool aims to shed light on this by providing insights into what percentage of income people are spending on their mortgages.

The National Association of Home Builders (NAHB) and Wells Fargo recently joined forces to unveil a fresh perspective on housing affordability – the Cost of Housing Index (CHI). This index aims to provide a clearer picture of what portion of their income Americans are dedicating to their mortgages.

While headlines often focus on national averages, the CHI delves deeper. It considers factors like home prices, interest rates, and local wages to provide a regional breakdown of housing affordability. This is crucial information for both aspiring homeowners and policymakers.

The Cost Of Housing index (CHI) results

According to the CHI index, 38% of a typical family’s income was needed to make a mortgage payment on a median priced new single-family home in the United States in the first quarter of 2024. Furthermore, low-income families (defined as those earning only 50% of the area’s median income) would have to spend 77% of their earnings to pay for the same new home.

As for mortgage payments on the purchase of an existing home, the percentages are similar. 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.

This index studied 176 markets. As for the level of cost burden seen across these markets, this analysis showed:

  • Severe cost burdened (greater than 50% of their income on a median-priced existing home) = 8 markets
  • Cost burdened (need to pay between 31% and 50%) = 80 markets
  • 88 markets showed a low cost burden of 30% or less

Summary

The Cost of Housing Index is a welcome addition to the conversation on housing affordability. By providing a more comprehensive analysis of mortgage spending across the country, the CHI can empower individuals to make informed decisions about home ownership and guide policymakers in crafting effective housing strategies.

Are you thinking about buying or selling real estate in the South Florida area? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, don’t forget to download the free Florida Home Search app for your smartphone or tablet.

By natasha moore

REALTOR® with Live South Florida Realty, Inc.