Pyramid Shows 36 Million Households Cannot Afford a $150,000 Home

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As described in a previous post, NAHB’s recently released its 2022 Priced-Out Estimates, showing that 87.5 million households are not able to afford a median priced new home, and that an additional 117,932 would be priced out if the price goes up by $1,000. A second post showed the households priced out by higher interest rates. This post focuses on the related U.S. housing affordability pyramid, showing how many households have enough income to afford homes at various price thresholds.

The pyramid uses the same standard underwriting criterion as the priced-out estimates to determine affordability: that the sum of mortgage payments, property taxes, homeowners and private mortgage insurance premiums should be no more than 28% of the household income.

Based on this, the minimum income required to purchase a $150,000 home is $36,074.  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.



1 reply

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