NAHB/Wells Fargo Debut New Cost of Housing Index for Q1

On Thursday, the National Association of Home Builders (NAHB) and Wells Fargo debuted their new NAHB/Wells Fargo Cost of Housing Index (CHI). The results of the Q1 CHI are based on a national median new-home price of $420,800 and median income of $97,800. The corresponding price for an existing home is $389,400.

The new quarterly CHI highlights the burden that housing costs represent for middle- and low-income families, NAHB said. In its inaugural release, the CHI reveals that a typical US family must spend 38% of its income to cover the mortgage payment on a median priced new single-family home. Low-income families, defined as those earning only 50% of median income, would have to spend 77% of their earnings to pay for the same new home.

NAHB notes that the figures track closely for the purchase of existing homes as well. A typical family would have to pay 36% of its income for a median-priced existing home, while a low-income family would need to pay 71% of its earnings to make the same mortgage payment.

Of note, the CHI breaks down the percentage of a family’s income needed to make a mortgage payment on an existing home in 176 metropolitan areas based on the local median home price and median income. Percentages are also calculated for low-income families in these markets.

In eight out of 176 markets in Q1, the typical family is severely cost-burdened (must pay more than 50% of their income on a median-priced existing home). In 80 other markets, such families are cost-burdened (need to pay between 31% and 50%). There are 88 markets where the CHI is 30% of earnings or lower.