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According to the U.S. housing affordability pyramid, the total sum of mortgage payments, property taxes, and mortgage insurance premiums should be no more than 28% of the household income. That equates to a minimum income of $36,074 for a home purchase totaling $150,000. While 36 million households can afford to buy a home priced between $0 and $150,000, 3 million can afford home purchases above 1.55 million, forming the upper extreme of a disproportionate affordability pyramid, according to NAHB’s Eye on Housing.
In 2022, about 36 million households in the U.S. are estimated to have incomes at or below that threshold and, therefore, the maximum priced home they can afford is between $0 and $150,000. These 36 million households form the bottom step or base of the pyramid. Another 24.4 million can only afford to pay a top price of somewhere between $150,000 and $250,000 (the second step on the pyramid), and so on up the pyramid. Each step represents a maximum affordable price range for fewer and fewer households.
The top step of the pyramid shows that around 3 million households can buy a home priced above 1.55 million. These comparatively wealthy Americans and the high-end homes they can afford are interesting, but market analysts should never only focus on them to the exclusion of the larger number of Americans with more modest incomes that support the pyramid’s base.
