Buying a home just got a little further out of reach.
A new measure of housing affordability took a turn for the worse in the second quarter, reversing part of the improvement recorded since early 2025. The culprit is a familiar one: higher mortgage rates, with a side of pricier new homes.
Here is what the numbers show. The National Association of Home Builders and Wells Fargo released data Thursday showing that a family earning the median income of about $107,000 would now spend 34% of that on a mortgage for a typical new home. That's an increase from the 32% in the previous quarter, and it marks the first worsening since 2023.
The math gets even tougher for families earning less. A household bringing in half the median income would need to hand over 67% of its earnings just to cover the mortgage on that same home.
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The shift is not dramatic on its face, but it matters because it reverses a trend. Affordability had been improving since early 2025. Now part of that progress has been reversed.
Two forces drove the change. First, mortgage rates rose steeply during the quarter, pushed up by the U.S. war with Iran. Thirty-year mortgage rates now sit around 6.8%, close to a one-year high.
Second, the price of new homes went up. Median new-home prices rose 2% in the quarter, according to NAHB. That combination, higher rates and higher prices, is what squeezed buyers.
Bill Owens, the NAHB chairman and an Ohio builder, put it plainly: "Buyers faced high mortgage rates and economic uncertainty, while builders dealt with rising construction costs, unnecessary regulatory burdens and labor shortages."
Builders are feeling the strain too. After a strong stretch four years ago, new-home sales have stalled. Builders have turned to pricey enticements, such as paying to reduce buyers' mortgage rates, to close deals. Those moves are costly for builders.
The data show that a typical family now spends a larger share of income on a new-home mortgage than it did in the first quarter. With mortgage rates near a one-year high and new-home prices up 2%, the affordability gain recorded since early 2025 has been partially reversed.
According to a fresh Bloomberg Intelligence poll, 70% of investment professionals anticipate a drop in single-family housing starts this year.
The bottom line: Housing affordability worsened in the second quarter as mortgage rates and new-home prices both rose. For buyers, that means a larger share of income is going toward a monthly mortgage payment than in the first quarter.
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