Higher borrowing costs and rising home prices are increasing the financial pressure on households while also creating challenges for builders and developers trying to deliver attainable housing. New data from the National Association of Home Builders shows that the share of household income required to purchase a home increased during the second quarter of 2026.
The NAHB/Wells Fargo Cost of Housing Index found that a family earning the national median income of $106,800 needed 34% of its earnings to cover the mortgage payment on a median-priced new home. That compares with 32% in the first quarter.
The increase in new-home affordability costs was linked to both financing and home prices. The average 30-year mortgage rate rose from 6.20% in the first quarter to 6.51% in the second quarter.
At the same time, the national median price of a new home increased 2%, from $403,200 to $410,700.
The affordability pressure was substantially greater for households earning half of the national median income. Those households would need to devote 67% of their earnings to the mortgage payment on a median-priced new home, up from 65% during the first quarter.
For existing homes, the affordability gap was wider. A typical family needed 36% of its income to cover a mortgage payment on a median-priced existing home, while a low-income family needed 71%.
The median existing-home price increased 8% during the quarter, reaching $434,900 compared with $404,300 in the first quarter.
Under U.S. Department of Housing and Urban Development guidelines, households spending more than 30% of income on housing are considered cost-burdened, while those spending more than 50% face a severe cost burden.
The second-quarter index examined mortgage affordability for existing homes across 175 metropolitan areas. Eight markets recorded severe cost burdens for typical households, with mortgage payments exceeding 50% of median family income.
San Jose-Sunnyvale-Santa Clara, California, recorded the highest burden at 82%. Other markets among the five most severely cost-burdened were San Francisco-Oakland-Fremont, California, at 71%; Urban Honolulu at 70%; San Diego-Chula Vista-Carlsbad, California, at 68%; and Naples-Marco Island, Florida, at 60%.
Low-income households in those five markets would need to allocate between 121% and 164% of their income toward the mortgage payment on a median-priced existing home.
At the other end of the market, Decatur, Illinois, recorded the lowest affordability burden, with a typical household needing 16% of income for a mortgage. Elmira, New York, followed at 17%, while Peoria and Springfield, Illinois, recorded 18% and 20%, respectively. Davenport-Moline-Rock Island, Iowa-Illinois, also recorded 20%.
The second-quarter figures highlight the relationship between financing costs, home prices and housing production. With mortgage rates and construction costs affecting the cost of delivering and purchasing housing, builders and developers face continued pressure to balance project economics with household purchasing power.
The affordability data also comes as the national housing market continues to face a shortage estimated by NAHB at approximately 1.2 million units.
For construction owners, home builders and developers, the regional differences in affordability underscore the importance of local housing prices, household incomes and financing conditions when evaluating residential development opportunities. The combination of higher mortgage rates and elevated home prices remains a key factor in housing demand and project feasibility.
Source: NAHB.
