Nearly Half of US Households Can’t Afford a $250,000 Home Is Not Entirely Accurate
A somewhat misleading statistic is making its way around the internet that is making home affordability look worse than it actually is. The National Association of Home Builders (NAHB) updated their housing affordability graph for 2024, revealing that 66.6 million households, or 49% of the total 134.9 million, are unable to afford a $250,000 home.
By the numbers:
- The nationwide median price of a new single-family home is $495,750.
- Based on a 6.5% mortgage rate, approximately 77% of U.S. households (134.9 million) cannot afford this median-priced new home.
Missing Context: While the numbers appear stark, they can be misleading. The NAHB’s graph is based on conventional underwriting standards, which assume that mortgage, property taxes, and insurance costs shouldn’t exceed 28% of household income.
28/36: The 28% standard is part of the long held 28/36 rule, which is the belief you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. While this is undoubtedly a good goal, it hardly reflects the realty of today’s marketplace.
Modern Look: Today, a front-end ratio (the percentage of a borrower’s gross monthly income going to housing) can be pushed above 40%, assuming the borrower holds no other debt. This is a significant increase from the traditional 28%, meaning more households might qualify for home purchases than the graph suggests.
Bottom Line: Despite these nuanced interpretations, home affordability remains a pressing issue. The headline figures point to a broader challenge in the U.S. housing market, but understanding the full context is crucial for addressing the problem effectively. The headline should really read “Nearly half of US households can’t afford a $250,000 home comfortably.” Which is a problem that we can solve by building more homes.
