Housing Remains Unaffordable for Many Despite Rising Incomes
Although incomes are rising and home price growth is slowing, housing remains largely unaffordable for many American households, according to recent data from the National Association of Home Builders/Wells Fargo Cost of Housing Index. In Q1 2025, a household earning the median income would have to use 36% of their earnings to afford a median-priced new home, while a low-income family needed 72%.
When looking at existing homes, these figures were at 35% for those earning the median income and at 70% for low-income households. Although affordability improved slightly from Q4 2024—thanks to a 6.5% income increase and modest home price declines—many families, especially those with lower incomes, still face steep housing cost burdens.
The most cost-burdened housing markets
While these affordability concerns are felt across the U.S., some markets are considered particularly unaffordable. San Jose-Sunnyvale-Santa Clara, Calif., was the most cost-burdened market in Q1 2025. There, households need to spend 88% of their income to make a mortgage payment on an existing home.
This was followed by Urban Honolulu, Hawaii, where 74% of a household’s income is needed to afford a home; San Diego-Chula Vista-Carlsbad, Calif., where 68% of a household’s income is needed; and Naples-Marco Island, Fla., where 66% of a household’s income is needed to afford a home.
The least cost-burdened housing markets
In other housing markets, households are far better off. Elmira, N.Y., was the least cost-burdened market in Q1 2025. In this market, typical families needed to spend just 15% of their income to pay a mortgage on an existing home.
This is followed by several Illinois cities, including Decatur, Ill., Peoria, Ill., and Springfield, Ill., where just 16% of an income is needed to afford a typical home.
Affordability challenges have weighed on buyers for quite some time
- Down Payments Continue on Upward Trajectory: In Q4 2024, the average down payment grew to $30,250, which is just over 14% of the total purchase price.
- Number of Homes Priced at $1M or More Hits Highest Share of All Time: In Q2 2024, one in every 10 homes was priced at $1 million or more.