by Recent study looks at how much pretax income is needed to cover mortgages for new, existing homes
WASHINGTON — The latest Cost of Housing Index from the National Association of Home Builders and Wells Fargo offers a window into housing affordability amid reports that housing prices are starting to come down.
A key takeaway from the fourth-quarter results is that a family earning a median income of $104,200 would need 34% of its pretax income to cover the mortgage payment on a median-priced new home. For low-income families earning just 50% of the median income, this rises to 67% for the same new home.
The NAHB said the data is based on a national median new home price of $405,300, which it said was down 1.2% from $410,100 in the third quarter.
NAHB said the corresponding price for an existing home in the fourth quarter was $414,900, down 2.8% from $426,800 in the previous quarter. However, the National Association of Realtors said this was up 1.2% from the same period in 2024.
“While existing homes remain more expensive than new homes, that inversion of typical trends is closing,” said NAHB Chief Economist Robert Dietz. “A typical existing home sold for 5% more than a typical new home in the second quarter, 4% more in the third quarter and just 2% more in the fourth quarter of 2025. Median new home pricing has declined nearly 15% since late 2022 due to builder-enacted price cuts, a small decline in typical new home size and a geographic shift for construction to lower-cost areas such as the Midwest. Existing home prices will be under downward pressure in 2026 due to ongoing housing affordability challenges.”
By comparison, the average price of a new home in December 2025 was $532,600, up nearly 4.7% from $508,900 a year earlier, according to the Federal Reserve Bank of St. Louis.
The cost of housing obviously has big implications for other areas of spending including the ability to purchase furniture and other amenities for the home.
In addition to providing a big-picture view of housing affordability, the NAHB/Wells Fargo analysis also delves into some specifics such as key markets that are the most and the least burdened.
Some key takeaways from its analysis are as follows:
+ There are 98 markets where the CHI is 30% of earnings or lower.
+ in 69 other markets, families need to pay between 31% and 50% of their income on a mortgage payment.
+ In eight of 175 markets, the typical family would be considered severely cost burdened, which means they would have to pay more than 50% of their income for a median-priced existing home.
The CHI also identified the most severely cost-burdened markets and the least.
The top most cost-burdened markets include:
+ San Jose-Sunnyvale-Santa Clara, California. There, 80% of a typical family’s income is needed to make a mortgage payment on an existing home.
+ In urban Honolulu, it was 69%.
+ In San Francisco-Oakland-Fremont, California, it was 63%.
+ In San Diego-Chula Vista-Carlsbad, California, it was 62%.
+ In Barnstable Town, Massachusetts, it was 56%.
+ In Miami-Fort Lauderdale-West Palm Beach, Florida, it was 56%.
In Naples-Marco Island, Florida, it was 56%.
NAHB said that low-income families would have to pay between 111% and 159% of their income in all seven of the above markets to cover a mortgage.
The top least cost-burdened markets include:
+ Decatur, Illinois – 16%.
+ Elmira, New York – 16%.
+ Springfield, Illinois – 17%.
+ Peoria, Illinois – 17%.
+ Davenport-Moline-Rock Island, Iowa-Illinois – 18%.
The study noted that low-income families in these markets would have to pay between 32% and 36% of their income to cover the mortgage payment for a median-priced existing home.
