Despite a rise in wages and falling prices, many households remain severely cost-burdened
Recent gains in household income and slight declines in home prices helped ease housing affordability pressures in early 2025, according to a recent National Association of Home Builders (NAHB) and Wells Fargo report.
However, the data shows that for many Americans, especially low-income households, affording a home remains out of reach.
The latest Cost of Housing Index (CHI) revealed that in the first quarter of 2025, a family earning the national median income of $104,200 needed 36% of that income to afford mortgage payments on a median-priced new home, which cost $416,900. That figure was down from 38% in the fourth quarter of 2024, thanks to a 6.5% increase in median income and a 1% decline in new home prices.
A similar trend was recorded for existing homes, where the typical mortgage payment dropped to 35% of median income, down from 37% in the previous quarter. Existing home prices fell 2% to $402,300, further supporting the slight affordability gains.
For low-income families earning just 50% of median income, affordability remains deeply constrained. Such households would need to spend 72% of their income on a new home (down from 76% in Q4 2024), or 70% for an existing home (down from 74%).
“While affordability registered slight gains in the first quarter, the Cost of Housing Index clearly shows the need for policymakers to take action to address the nation’s housing affordability crisis,” said NAHB chairman Buddy Hughes.
Hughes urged policymakers to support efforts that will expand the nation’s housing supply.
“Eliminating burdensome regulations, ending tariffs on Canadian lumber and other building materials, providing funding to promote careers in the skilled trades and expediting approvals for affordable projects will allow builders to construct more homes,” he said.
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NAHB chief economist Robert Dietz echoed the urgency of addressing regulatory and economic obstacles.
“The latest CHI data illustrate that far too many households remain cost burdened and highlight the need for policymakers to remove regulatory roadblocks, address economic uncertainty and provide a better business climate that will help builders to construct more attainable, affordable housing,” Dietz said.
Most and least affordable markets
The CHI report defined cost-burdened families as those spending more than 30% of income on housing, and severely cost-burdened families as those spending over 50%. Based on this metric, 91 out of 175 metro areas had CHI values of 30% or less (not cost-burdened) in the first quarter of 2025.
Around 75 areas showed cost-burdened conditions (31–50%) and nine metro areas were classified as severely cost-burdened (over 50%).
The most severely cost-burdened markets were concentrated in high-cost coastal regions:
- San Jose-Sunnyvale-Santa Clara, CA – 88% of median income required for existing home mortgage
- Urban Honolulu, HI – 74%
- San Diego-Chula Vista-Carlsbad, CA – 68%
- Naples-Marco Island, FL – 66%
- San Francisco-Oakland-Fremont, CA – 64%
For low-income households in these areas, mortgage payments would consume between 128% and 176% of income, highlighting extreme affordability pressures.
Meanwhile, the least cost-burdened markets were found in smaller cities in the Northeast and Midwest:
- Elmira, NY – 15% of income needed
- Decatur, IL – 16%
- Peoria, IL – 16%
- Springfield, IL – 16%
- Davenport-Moline-Rock Island, IA-IL – 17%
Even for low-income buyers in these regions, housing costs represented a relatively modest 31–35% of income.
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