Unaffordability of New Homes Surges in January 2025

The final month of President Biden’s 48 months in office saw a surge in the relative unaffordability of new homes.

The monthly mortgage payment for the median new home purchased in the United States would consume 42.9% of the monthly income earned by the typical U.S. household, up from December 2024′s revised figure of 38.7%. January 2025 represents the 34th consecutive month in which the monthly mortgage payment for the median new home purchased in the United States exceeded 36% of the median household’s pre-tax income, the upper threshold of household income that mortgage lenders use to determine whether they will lend to a household that has no other debt.

The latest update of our chart tracks the changing relative affordability of the typical new home sold in the U.S. is for the typical American household with respect to the mortgage lending industry’s key affordability thresholds from January 2000 through January 2025.

The relative unaffordability of new homes was driven up by two factors in January 2025. First, the initial estimate of the median price of new homes sold jumped to $446,300, more than $30,000 higher than December 2024′s median price. Second, the average mortgage rate for a conventional 30-year fixed rate mortgage averaged 6.96% in January 2025, up from December 2024′s average of 6.65%.

The affordability crisis for new homes has its origin in the high inflation that was unleashed by the Biden-Harris administration’s policies in March 2021. Although it rose slowly at first, the cost of monthly mortgage payment began to skyrocket after December 2021. As a percentage of median household income, the monthly mortgage payment for a new home climbed above the key 36% threshold of relative affordability in April 2022. The relative affordability of new homes has remained above this level for 34 consecutive months.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 26 February 2025. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 26 February 2025. 

Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 3 March 2025. Note: Starting from December 2022, the estimated monthly mortgage rate is taken as the average of weekly 30-year conventional mortgage rates recorded during the calendar month.

Image Credit: House keys on hand photo by Maria Ziegler on Unsplash .