60% of Households Cannot Afford New Median Priced Home

Roughly 60% of households, or 75.1 million, cannot afford a new median priced home, according to new priced out estimates by the National Association of Home Builders. If new median home prices were to increase by another $1,000, it would price out 153,967 more households. Being unable to afford a new median priced home, according to NAHB, means incomes are insufficient to qualify for a mortgage under standard underwriting criteria. This criteria is the sum of mortgage payments, property taxes, homeowners and private mortgage insurance premiums during the first year, which should not exceed 28% of a household’s total income.

Key assumptions include a 10% down payment, a 30-year fixed rate mortgage at an interest rate of 2.8%, and an annual premium starting at 73 basis points for private mortgage insurance.

As usual, NAHB’s latest update includes priced out estimates for all states and metropolitan areas. The priced out numbers vary with both the sizes of the local population and the affordability of its new homes. Among all the states, Texas registered the largest number of households priced out of the market by a $1,000 increase in the median-priced home in the state (14,309), followed by California (12,361), and Florida (10,215), largely because these are the country’s three most populous states.

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