(NAHB) After three consecutive quarters of modest improvement, housing affordability declined in the second quarter as higher mortgage rates, rising construction costs and economic uncertainty weighed on the market.
According to the latest data from the National Association of Home Builders (NAHB)/Wells Fargo Cost of Housing Index (CHI), results from the second quarter show that a family earning the nation’s median income of $106,800 needed 34% of its income to cover the mortgage payment on a median-priced new home. Low-income families, defined as those earning only 50% of median income, would have to spend 67% of their earnings to pay for the same new home.
The figures are higher for the purchase of existing homes in the U.S. 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.
“Housing affordability weakened for both new and existing homes in the second quarter, driven by several factors,” said NAHB Chairman Bill Owens, a home builder and remodeler from Worthington, Ohio. “Buyers faced high mortgage rates and economic uncertainty, while builders dealt with rising construction costs, unnecessary regulatory burdens and labor shortages. The recently enacted 21st Century ROAD to Housing Act will help address many of these challenges, but implementation will take time.”
“A nationwide housing shortage of roughly 1.2 million units continues to strain affordability, and the latest CHI data show that too many households remain cost burdened,” said NAHB Chief Economist Robert Dietz. “Policymakers need to remove regulatory barriers, reduce economic uncertainty and support a stronger business climate so builders can produce the homes and apartments the nation urgently needs.”
The percentage of a family’s income needed to purchase a new home rose from 32% in the first quarter of 2026 to 34% in the second quarter, driven by a more than 30-basis-point rise in the average mortgage rate and a 2% increase in the median price of a new home. The low-income CHI also rose 65% to 67% over the same period.
Meanwhile, affordability of existing homes moved lower than new homes for both median- and low-income families between the first and second quarter of this year. The CHI indices for existing homes were 36% and 71% in the second quarter vs 32% and 65%, respectively, in the first quarter. The affordability downturn was due primarily to a sharp increase in median home prices from the first to second quarter.
The CHI is a quarterly analysis of housing costs in the U.S. and at the metropolitan area level. The CHI represents the share of a typical family’s income needed to make a typical mortgage payment. The mortgage payment is calculated by taking median home prices, assuming a 10% down payment, and adding taxes, insurance and PMI. Median family income is published by the Department of Housing and Urban Development. A low-income CHI is also calculated for families earning only 50% of the area’s median income.
The U.S. data for the percentage of earnings needed to purchase a new home in the second quarter is based on a national median new home price of $410,700 and median income of $106,800. The second quarter median new home price is up 2% from $403,200 in the first quarter. Meanwhile, the corresponding price for an existing home rose much more sharply (8%) in the second quarter to $434,900 from $404,300 in the previous quarter. The average 30-year mortgage rate moved higher from 6.20% in the first quarter to 6.51% in the second quarter.
HUD defines cost-burdened families as those “who pay more than 30% of their income for housing,” and a severe cost burden is defined as paying more than 50% of one’s income on housing.
The CHI breaks down the percentage of a family’s income needed to make a mortgage payment on an existing home in 175 metropolitan areas based on the local median home price and median income. Percentages are also calculated for low-income families in all of these markets.
In eight out of 175 markets in the second quarter, the typical family is severely cost-burdened (must pay more than 50% of their income on a median-priced existing home). In 77 other markets, such families are cost-burdened (need to pay between 31% and 50%). There are 90 markets where the CHI is 30% of earnings or lower.
The Top 5 Severely Cost-Burdened Markets
San Jose-Sunnyvale-Santa Clara, Calif., was the most severely cost-burdened market on the CHI, where 82% of a typical family’s income is needed to make a mortgage payment on an existing home. This was followed by:
- San Francisco-Oakland-Fremont, Calif. (71%)
- Urban Honolulu, Hawaii (70%)
- San Diego-Chula Vista-Carlsbad, Calif. (68%)
- Naples-Marco Island, Fla. (60%)
Low-income families would have to pay between 121% and 164% of their income in all five of the above markets to cover a mortgage.
The Top 5 Least Cost-Burdened Markets
By contrast, Decatur, Ill., was the least cost-burdened market on the CHI, where typical families needed to spend just 16% of their income to pay for a mortgage on an existing home. Rounding out the least burdened markets are:
- Elmira, N.Y. (17%)
- Peoria, Ill. (18%)
- Springfield, Ill. (20%)
- Davenport-Moline-Rock Island, Iowa-Ill. (20%)
Low-income families in these markets would have to pay between 31% and 39% of their income to cover the mortgage payment for a median-priced existing home.
Visit nahb.org/chi for tables and details.
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