National Association of Home Builders recently released its 2022 priced-out estimates, a report showing the percentage of American households who can afford a home. The report found that sky-high home prices and rising interest rates strongly affect housing affordability, with their new estimates showing that around 69% (87.5 million) of households can’t afford a median-priced new home in 2022. This means that their incomes are not enough to qualify for a mortgage with standard underwriting criteria.
The median home price rose almost 17% last year, a staggering number that made housing unaffordable for millions of American households that could have previously afforded a home. The NAHB report estimates that when the new median price of homes rises by $1,000, almost 118,000 more American households will be priced out of the market. These households would qualify for a mortgage before, but not after, the price increases.
Underwriters use set criteria to evaluate affordability. The report adds up the mortgage payments, property taxes, homeowners insurance, and mortgage insurance. The sum of these payments during the first year of the mortgage must be no more than 28 percent of the household’s income. This assumes a 10% down payment on a 30-year fixed-rate mortgage with a 3.5% interest rate.
NAHB’s latest report includes priced-out estimates for all states and metropolitan areas.
The metro with the largest number of households priced out is New York-Newark-Jersey City, NY-NJ-PA. This isn’t surprising, as the New York metro area is the nation’s most populous, but housing affordability in the area is also quite low. According to the report, the median-priced new home is only affordable to 14% of households, compared to 31% nationally.
Around 33% percent of households in the Chicago-Naperville-Elgin, IL-IN-WI metro area can afford a median-priced home, compared to 45% in the Philadelphia-Camden-Wilmington, PA-NJ-DE-MD metro area.
RealtyHop’s February 2022 Housing Affordability Index found very similar results. The index ranks the most and least affordable metro areas in America, using the following criteria:
- Projected median household income
- Median for-sale home listing prices via RealtyHop data
- Local property taxes via ACS Census data
Here are the least affordable metro areas in America, ranked by how much an average household would have to spend on housing costs as a percentage of their income:
- Miami (78.71%)
- New York, NY (77.98%)
- Los Angeles (74.2%)
- Newark, NJ (72.33%)
- Jersey City, NJ (59.09%)
For the first time since we started tracking affordability in America, Miami became the least affordable city in the nation. The city has always been a popular destination for people looking for warmer weather and a more affordable lifestyle. But the recent migration induced by the global pandemic has further driven up the prices in Miami, and locals are being priced out in bidding wars when facing competing offers from people from larger, wealthier cities such as New York and San Francisco.
Here are the most affordable metro areas in America, ranked by the same criteria:
- Wichita, KS (15.05%)
- Fort Wayne, IN (15.97%)
- Detroit, MI (16.26%)
- Lubbock, TX (20.33%)
- Cleveland, OH (20.56%)
Tyler graduated from Virginia Commonwealth University in 2017 with a Bachelor's degree in Urban and Regional Studies. Currently based in Los Angeles, he works as a freelance content writer and copywriter for companies in real estate, property management, and similar industries. Tyler's main professional passion is writing about critical issues affecting big and small cities alike, including housing affordability, homelessness, inequality, and transportation. When he isn't working, he usually plans his next road trip or explores new neighborhoods and hiking trails.