The relative affordability of new homes in the U.S. unexpectedly improved in June 2022. Unfortunately, the reason why it improved is the highest mortgage rates since November 2008 caused demand to plunge, prompting homebuilders to respond with dramatic price cuts.

Pixabay

The following chart shows the effect of June 2022's plunge in the median price of a new home sold in the U.S.

This chart shows the value of a 30-year fixed-rate mortgage for a median new home as a percentage of median household income rapidly dropped from May 2022's initial estimate of 38.4% to 35.3% in June 2022.

In terms of raw affordability, the ratio of median household income to the median new home sale price in the U.S. held steady near its record low level of 17.4% in June 2022.

Expanding the number of decimal places, May 2022's 17.38% represents the lowest level of affordability for new homes in modern U.S. history. June 2022's raw affordability level was just slightly higher at 17.45%. New home price estimates and median household income estimates are both still subject to data revisions, so these preliminary results may change in upcoming months.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 26 July 2022. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 26 July 2022. 

Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 26 July 2022.

More By This Author:

Median Household Income In June 2022
The Escalating Price Of Wheat
Market Cap Of U.S. New Homes Drops In June 2022