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NAHB Analyzes Housing Affordability Crisis07-25-24 | News

NAHB Analyzes Housing Affordability Crisis

Economic Challenges Highlighted in Current Data
by Staff

New Analysis from the National Association of Home Builders suggests that housing shortages and high costs are straining American families.

The National Association of Home Builders (NAHB) recently released an analysis on the current state of housing affordability and the market. They suggest that ongoing affordability issues across the country are significantly impacting how many Americans live, budget, and plan for their futures. With a nationwide shortage of approximately 1.5 million housing units, home prices and rent have both surged - by 26% and 47%, respectively, since 2020 - according to the latest Harvard University Joint Center for Housing Studies' (JCHS) The State of the Nation's Housing 2024 report.
NAHB's recently released Cost of Housing Index (CHI) reveals that 38% of a typical family's income is needed to make a mortgage payment on a median-priced new single-family home in the United States. Low-income families, earning only 50% of the median income, need to spend 77% of their income to afford the same home. The struggles are similar for those purchasing existing homes, with median prices hitting an all-time high last month. A typical family has to allocate 36% of their income for a median-priced existing home, while low-income families need 71%.
Moreover, 103.5 million U.S. households' incomes aren't sufficient to afford a median-priced new home ($495,750) due to stringent mortgage underwriting criteria. The lack of housing availability exacerbates the issue, with combined inventory for new and existing single-family homes at just a 4.4 months' supply.
Furthermore, the association's analysis shows that high interest rates deter homeowners from selling, as they face steep cost increases when buying a new home at current mortgage rates. Regional variations in housing attainability are stark, with the most cost-burdened metros primarily located in California, Florida, and Hawaii, while Midwestern states like Illinois, Iowa, Michigan, and Ohio remain less affected.

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Soaring housing costs also burden renters, with half of all renter households being cost-burdened in 2022, the highest number on record. Regulatory hurdles, high building material costs, labor shortages, and local impact fees further inflate housing costs.
The NAHB highlights that shelter inflation (rising costs of rent and homeownership) is a major contributor to overall economic inflation, exacerbated by high interest rates for mortgages and construction loans. To address these issues, they have composed a 10-point plan that includes:
1. Eliminating excessive regulations
2. Promoting careers in skilled trades
3. Fixing building material supply chains and reducing costs
4. Passing federal tax legislation to increase affordable housing production
5. Overturning inefficient local zoning rules
6. Alleviating permitting roadblocks
7. Adopting cost-effective building codes
8. Reducing local impact fees and upfront taxes on housing construction
9. Making it easier for developers to finance new housing
10. Updating employment policies to promote flexibility and opportunity
https://www.nahb.org/blog/2024/07/understanding-housing-affordability-in-todays-market

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