New home prices fall, still unaffordable for most American households

In February 2024, the median price of new homes sold in the United States fell to $400,500. This initial estimate will go through three revisions before being finalized, but so far it represents the lowest median price recorded for new homes since June. 2021. Between then and now, the average new home sold in the U.S. exceeds that benchmark.

Unfortunately, that doesn’t do much for the typical American family. Despite the lowest price recorded for the median new home sold since June 2021, it is still out of reach for the typical American household.

Using a conventional fixed-rate 30-year mortgage with an average interest rate of 6.78% in February 2024, the monthly mortgage payment on the median new home sold would consume 40.3% of the income earned by a household exactly in the middle of the U.S. income spectrum. I will do it. .

The following chart shows how the relative affordability of a typical new home sold in the United States has changed over the 21st century from January 2000 to February 2024.

The measure is well above the 28 percent mortgage debt-to-income ratio and 36 percent total debt-to-income ratio thresholds that mortgage lenders set to determine whether borrowers can support mortgage payments.

Mortgage payments for the median new home sold have consistently exceeded the 28% baseline affordability threshold since February 2021, and have exceeded the higher 36% affordability threshold since March 2022.

References

U.S. Census Bureau. New residential sales history data. House for sale. (Excel spreadsheet). Accessed March 25, 2024.

U.S. Census Bureau. New residential sales history data. Median and average sale price of homes sold. (Excel spreadsheet). Accessed March 25, 2024.

Freddie Mac. 30-year fixed rate mortgage since 1971. (online database). Accessed April 1, 2024. Note: Starting December 2022, estimated monthly mortgage interest rates will be taken as the average of the weekly 30-year conventional mortgage rates recorded for that month.

Political calculation. Median household income as of February 2024. (Online article). April 2, 2024.

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Editor’s note: The summary bullet points for this article were selected by Seeking Alpha editors.