NAHB recently released its 2021 priced out estimates. The new estimates show that 75.1 million households (roughly 60 percent of all U.S. households) are not able to afford a median priced new home in 2021, in that their incomes are insufficient to qualify for a mortgage under standard underwriting criteria. If the median new home price goes up by $1,000, an additional 153,967 households would be priced out of the market. These 153,967 households would qualify for the mortgage before the price increase, but not afterward.
The underwriting criterion used to determine affordability is that the sum of mortgage payments, property taxes, homeowners and private mortgage insurance premiums (PITI) during the first year is no more than 28 percent of the household’s 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.
The metropolitan area with the largest priced out effect, in terms of absolute numbers, is New York-Newark-Jersey City, NY-NJ-PA, where 6,756 households would not be able to qualify for a mortgage to purchase a new median-priced home if its price goes up by $1,000. This is largely because New York metro area, where the median-priced new home is only affordable to 26.1% of households, is the most populous metro area with roughly 8 million households. Chicago-Naperville-Elgin, IL-IN-WI metro area registers the second largest number of priced-out households (5,162), followed by Houston-The Woodlands-Sugar Land, TX metro area (4,533). Compared to New York, the median priced homes in Chicago or Houston metro areas are relatively more affordable to begin with. Around 44% of households in Chicago and 51% of households in Houston metro area can afford new median-priced homes there.
More details, including priced out estimates for every state and over 300 metropolitan areas, and a description of the underlying methodology, are available in the full study.
For comparison, what % of US households were priced out of a median priced home in MARCH 2020 – one year ago?
San Diego, CA
The answer for that kind of question is better addressed with our Housing Opportunity Index. In the 4th quarter of 2019, 63.3% of new and existing home sales were affordable for a typical household. As of the fourth quarter 2020, that share fell to 58.3%. That’s a substantial decline in just 12 months.