The buyers of new homes in the U.S. got a break in August 2022. The combination of declines in new home sale prices and mortgage rates allowed buyers to come out ahead of July 2022's peak unaffordability level.
The following chart shows how those two factors combined to provide relief for new home buyers.
In August 2022, the mortgage payment for the median new home sold in the U.S. purchased by a median income-earning household would consume 36.9% of their income. That's down sharply from July 2022's revised level of 40.6% of household income, as we've revised this figure higher to account for July 2022's median household income being revised significantly lower.
Looking at raw affordability, we find August 2022's median household income would cover just 17.21% of the cost of a median new home in the U.S. near the new record low of 17.18% for July 2022. The next chart shows the evolution of that measure:
August 2022's improvement in the affordability of new homes may be very short lived. We already know mortgage rates surged in September 2022, which would make mortgage payments substantially less affordable. How much less affordable will depend on what happens with new home sale prices, where we won't get the data for September 2022 until near the end of October.
References
U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 27 September 2022.
U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 27 September 2022.
Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 27 September 2022.
Labels: personal finance, real estate
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