Housing accounts for roughly one-third of the average American’s spending, making higher housing costs a potential strain on household budgets.
Over the last five years, rapidly rising home prices and higher financing costs have outpaced wage gains in most counties in the United States, making new homeownership less affordable in many regions across the country.
For first-time homeowners, the average share of household income needed to purchase and finance a median-priced home in a given county has risen throughout most of the United States. Many counties are considered unaffordable because average wage earners in these counties spend 33% or more of their monthly income on homeownership costs.
Homeownership costs and long-term debt greater than 33% of gross income is generally considered “unaffordable” by the Federal Deposit Insurance Corporation. This 33% share of gross income is an important consideration in housing markets, as lenders are reluctant to make loans that exceed this share of income.
From 2018–19 to 2024, the share of income needed to own a median-priced home rose in most U.S. counties, evidenced by the drastic shift from mostly “affordable” counties to “unaffordable” counties during this period.
The decline in new home affordability for the average household was most pronounced in the western United States, coastal markets and parts of the southeast. However, even counties in the central United States – for example, in Missouri, Texas and Minnesota – experienced declines in affordability.
Housing affordability for first-time homebuyers began to worsen in 2022. In 2018, the share of income needed to purchase a new home in the median county was roughly 20%, and a median-priced home was considered unaffordable in only 12% of counties. By 2024, the share of income needed to purchase a new home rose to 28% in a median county, and a median-priced home was considered unaffordable in 37% of U.S. counties.
The share of household income needed for a firsttime buyer to own a house has risen in recent years because of both rising house prices and higher borrowing costs.
In late 2020, house prices in most locations accelerated as the coronavirus pandemic pushed many renters and roommates to seek out more space, thereby increasing the demand for housing. While average household income rose during this period, higher incomes were not enough to offset higher house prices in most counties.
In 2022, higher borrowing rates began exacerbating affordability issues across the United States, making houses in many counties unaffordable for the average household. Borrowing rates have leveled off, wages have continued to rise steadily, and the pace of house price increases decelerated in 2023 and 2024, but new homeownership remains costly across large portions of the country.
Although rising homeownership costs for firsttime buyers have been broad-based, they have been greater in metro areas than nonmetro areas. New homeownership has become less affordable across metro and nonmetro counties alike. However, the gap in affordability between metro and nonmetro areas has widened since the pandemic.
The median share of average household income spent on homes in metro counties grew from 23% in 2018–19 to 33% in 2024. The same share for nonmetro (rural) counties rose from 19% to 26% over the same period. In 2024, nonmetro counties remained relatively more affordable, with roughly two-thirds of nonmetro counties designated as affordable compared with only one-half of metro counties.
Overall, housing costs remain high for new homebuyers, and affordability has worsened over the last five years. Higher house prices and borrowing costs have not been offset by higher wages, causing affordability issues for new homeowners across most of the United States.
These affordability issues are broad-based across metro and nonmetro counties, but housing costs increased more relative to incomes in metro counties. It may take time for housing affordability to return to historical norms.