The new home affordability crisis is showing signs of ending for the first time in nearly three-and-a-half years. The median sale price of a new home sold in the United States has dropped below the upper threshold of affordability that determines whether the typical American household can afford the monthly mortgage payment on the typical new home sold in the U.S.

That threshold is defined by having a mortgage payment that represents no more than 36% of household income, which lenders have historically used to determine whether they will loan money to a household that has no other debt. For October 2025, a household earning the median household income would that bought a new home at the month's median sale price of $392,300 would see their mortgage payment consume 34% of their monthly household income, which puts the typical new home within affordable reach.

For households that do carry other debt, lenders prefer their monthly mortgage payments consume no more than 28% of their pre-tax household income to ensure they have financial resilience to deal with unexpected expenses when their mortgage payments fall below these affordability thresholds. At 34% of its monthly household income, the median new home sold in October 2025 would be affordable for median income-earning households that carry low levels of other debt, the first time that's even been possible since March 2022.

The latest update of our chart tracks the changing relative affordability of the typical new home sold in the U.S. is for the typical American household with respect to the mortgage lending industry's key affordability thresholds from January 2000 through October 2025.
 

The National Association of Realtors explains the main factor why new homes have suddenly dropped into the range of affordability:

Prices for newly built homes fell to a four-year low in the fall as builders cut prices, according to a report delayed by the government shutdown.

The median sales price for new homes that went under contract in October was $392,300, down 8% from a year earlier and the lowest level since 2021, the U.S. Census Bureau reported on Tuesday.

New-home prices have been trending down since late 2022, after the affordability crisis priced many potential buyers out of the market. Homebuilders responded by cutting prices and boosting incentives.

This month, 40% of builders reported cutting prices, while 67% reported using sales incentives such as mortgage rate buydowns, according to the leading survey of homebuilder sentiment.

Meanwhile, sales of new homes improved year-over-year as mortgage rates were also lower on average in October 2025, contributing to the improved affordability of new homes for the typical American household:

Sales of new single-family houses were at a seasonally-adjusted annual rate of 737,000 in October, little changed from the prior month but up 19% from a year earlier.

Transactions rose as falling mortgage rates and prices both contributed to making new homes more affordable for prospective homebuyers.

Mortgage rates averaged 6.25% in October, down from 6.43% in October 2024, according to Freddie Mac.

The average price of a new home sold in October 2025 was $498,000, which was three percent higher than September 2025's average sale price of $483,500.

Looking at what that means for new home builders, we find time-shifted (centered) trailing twelve month average of the total value of new homes sold in the United States is $29.11 billion. We find the lower sale prices of new homes is contributing to an upward trend in the number of sales, but we find the average sale price of a new home is relatively stable, or flat.

The following charts present the U.S. new home market capitalization, the number of new home sales, and their sale prices as measured by their time-shifted, trailing twelve month averages from January 1976 through October 2025.
 

Rising trend for new home sales
 

Rising trend for average home prices
 

Following up our coverage of August 2025's potential statistical fluke increase in the number of new home sales, revisions to the sales data released on 13 January 2026 confirms the August 2025 sales figures were indeed a fluke.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 13 January 2025. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 13 January 2025. 

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