For the 27th consecutive month since March 2022, the cost of the median new home sold in the United States remained fully out of the affordable reach of the typical American household. In June 2024, the monthly mortgage payment for the median new home sold would consume 42.3% of the household income earned by a family in the exact middle of the U.S. income distribution.

If you would like to check that percentage on your own, here are the numbers you need as they apply for June 2024:

• Median sale price of new home: $417,300
• Median household income: $78,119
• Average 30-year conventional fixed rate mortgage: 6.92%

Assuming a 0% down payment, the monthly mortgage payment on a home sold at this price at the average 30-year mortgage rate in June 2024 is $2,753. That's 42.3% of the monthly income of $6,509 for the typical American household, which is above the 36% threshold that marks the upper end of the "affordable" range that home lenders have long used in determining whether to loan money to prospective homeowners assuming they have no other debts. It is also well above the 28% threshold that sets the lower end of the maximum amount of mortgage debt for which home owners are willing to risk extending credit for new homeowners who do have other debts.

Here's the latest update of our chart using all this information for June 2024 showing the relative affordability of the typical new home for the typical American household since January 2000.

Because we're talking about numbers, we wondered how each of the inputs for the relative affordability math would have to change for the median new home sold to be within the affordable reach of an American household.

If you ask the question of how much income does it take to afford a new home at June 2024's median new home sale price and average mortgage rate, a household earning $87,000 could buy that house with the monthly payment consuming 36% of its income, provided it had no other debt. A household that does have other debt would have to earn $118,000 to afford the house, the monthly payment for which would consume 28% of its income.

If mortgage rates were to drop, leaving all the other numbers unchanged, we find that the interest rate of a 30-year mortgage must decline to 5.40% to be at the 38% threshold for the affordable range for a household at the 50th percentile of income. To be fully affordable, at the lower 28% of income threshold, mortgage rates would have to fall further to 3.29%.

If the median sale price of a new home fell, it would have to drop to $375,000 to be considered affordable for the median income earning household at the 36% threshold. The price of the median new home sold would have to plunge to $276,000 to be considered affordable at the 28% threshold.

We've simplified the math by only considering the zero percent down payment scenario. Doing this has the benefit of standardizing the results because it both quantifies and incorporates the opportunity cost of the down payment into the results of the monthly mortgage payment calculation. For a household, converting savings into a down payment may bring their monthly mortgage payment down to an affordable level, but getting to that benefit carries a real cost, which is why it makes sense to follow this practice.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 24 July 2024. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 24 July 2024. 

Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 1 August 2024. Note: Starting from December 2022, the estimated monthly mortgage rate is taken as the average of weekly 30-year conventional mortgage rates recorded during the calendar month.

Political Calculations. Median Household Income in June 2024. [Online article]. 1 August 2024.

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