Political Calculations' initial estimate of the total valuation of U.S. new home sales in July 2025 is $29.68 billion.

This estimate is up about one percent from Political Calculations' initial estimate of $29.37 billion for June 2025. That month's estimate however has been revised upward to $29.41 billion this month. The initial estimate for July 2025 is 0.9% above this revised level.

These figures are time-shifted, partial trailing twelve month averages. The initial estimate for any given month is based on the U.S. Census Bureau's estimated annualized number of new home sales multiplied by their average price for that month, which is averaged with the data for the preceding six months. These total valuation (or new home market capitalization) estimates are then updated as each new month's data is added to it, until it covers a full twelve months worth of data, and as older data is revised, which continues until that data is finalized some 10 months after the month for which the data applies.

The benefit of this approach is that it 'centers' the trailing average in something closer to real time, which makes it easier to tell when changes in trend take place. The following charts present the U.S. new home market capitalization, the number of new home sales, and their sale prices as measured by their time-shifted, trailing twelve month averages from January 1976 through July 2025. The data through July 2025 indicates the new home market cap is rising mainly due to average sale prices being elevated in recent months even as the number of sales has trended downward during this period.

New home sales in downward trend:

Flat trend for prices at elevated level:

Reuters reports the number of new homes sold in July 2025 fell after the previous month's sales numbers were revised sharply upward:

Sales of new U.S. single-family homes fell in July following a sharp upward revision to the prior month's sales pace, and the overall trend remained consistent with a housing market struggling in an environment of high mortgage rates.

The report from the Commerce Department on Monday bolstered economists' expectations that the housing market slump could persist through the end of the year. Though mortgage rates have eased on expectations that the Federal Reserve would resume cutting interest rates in September, they continue to outpace wage growth, pushing home ownership beyond the reach of many.

That's not quite correct, as new home prices in recent months have been moving toward becoming affordable for the first time in more than three years. At this time, they remain out of reach for the typical American household, which we'll explore in more detail in a separate analysis in upcoming weeks.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 26 August 2025. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 26 August 2025. 

Image credit: Microsoft Copilot Designer. Prompt: "A newly constructed two-story suburban house with beige siding and a dark gray gabled roof. The house features white trim, a large arched window on the second floor, a white double garage door, and a black front door with a small porch. The front yard has a neatly manicured green lawn with small shrubs near the foundation. A concrete driveway extends from the garage all the way to the street. In the foreground, a red and white "NEW HOME FOR SALE" sign is staked into the grass of the front yard, supported by a white wooden post. The sky is bright blue with scattered white clouds, and a line of trees is visible in the background." Note: This image went through multiple iterations. So many, in fact, we asked Copilot to write a prompt for generating the final result.

After taking a turn toward the worse last month, new home affordability in the U.S. moved tantalizingly closer to the upper threshold of affordability for the typical American household in June 2025.

Three factors combined to make that outcome happen. Most importantly, the initial estimate of the median new home sold in the U.S. during June 2025 dropped 4.9% from May 2025's revised estimate to $401,800. Second, median household income rose to an initial estimate of $83,641. Third, the average interest rate for the month came in at 6.82%, which is the same as for May 2025 but at least didn't go higher to offset the other improvements.

Together, these three factors reduced the monthly payment on a zero-down 30-year mortgage for the median new home sold to $2,283. This mortgage payment would consume 37.6% of the income earned by a household earning the median income in the U.S. for June 2025, which is the lowest level for this affordability measure recorded since the U.S. new home affordability crisis began after March 2022.

Since that figure is still above 36% of median household income for June 2025, which represents the upper threshold of relative affordability that lenders have historically used to determine whether they will loan money to a household that has no other debt. For households that do carry other debt, lenders prefer their monthly mortgage payments consume no more than 28% of their pre-tax household income. Mortgage borrowers have more financial resilience to deal with unexpected expenses when their mortgage payments fall below these affordability thresholds.

And while tantalizingly close to that upper threshold, it is still above it, which means the new home affordability crisis has entered its 40th consecutive month.

The latest update of our chart tracks the changing relative affordability of the typical new home sold in the U.S. is for the typical American household with respect to the mortgage lending industry's key affordability thresholds from January 2000 through June 2025.

Looking ahead to July 2025, we find the average interest rate for the average 30-year conventional fixed rate mortgage held declined slightly to 6.72%. Borrowing costs remain elevated but that small change provides a small tailwind for new home affordability. How new home affordability will change in July 2025 will depend greatly on how the median new home prices changes, which we won't know until near the end of August 2025.

Analyst's Notes

The affordability crisis for new homes has its origin in the high inflation that was unleashed by the Biden-Harris administration's policies in March 2021. Although it rose slowly at first, the cost of monthly mortgage payment began to skyrocket after December 2021. As a percentage of median household income, the monthly mortgage payment for a new home climbed above the key 36% threshold of relative affordability in April 2022, remaining above it in every month since.

We use the zero-down payment scenario to assess affordability because it provides a simple way to account for the opportunity costs of paying a down payment when buying a new home for many homebuyers. There are also several lending programs for qualified homebuyers that do provide a zero-down payment option to try to make buying a home more affordable, so it is also a realistic scenario on its own, though the majority of homebuyers do use money saved to make a down payment when they buy a home.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 24 July 2025. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 24 July 2025. 

Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 6 August 2025. Note: Starting from December 2022, the estimated monthly mortgage rate is taken as the average of weekly 30-year conventional mortgage rates recorded during the calendar month.

Image Credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon highlighting the new home affordability crisis in the United States".

Political Calculations' initial estimate of the total market capitalization of new homes sold in the United States ticked up again in June 2025. The first estimate of the time-shifted trailing twelve month average of the total value of new homes sold during the month is $29.37 billion.

This figure represents an increase of 3.1% from our revised estimate of $28.48 billion in new homes sales in May 2025. The May 2025 data was revised downward from the initial estimate of $28.86 billion we presented in the previous edition of this series.

The following charts present the U.S. new home market capitalization, the number of new home sales, and their sale prices as measured by their time-shifted, trailing twelve month averages from January 1976 through June 2025. The data through June 2025 indicates the new home market cap is rising mainly due to a rising trend in sale prices as the number of sales is trending downward.

New home sales in a falling trend:

Rising trend for home prices:

Reuters indicates the number of new homes for June 2025 was less that expected:

Sales of new U.S. single-family homes increased less than expected in June amid higher mortgage rates, pushing inventory to levels last seen in late 2007, which could keep homebuilding subdued.

New home sale units rose 0.6% to a seasonally adjusted annualized rate of 627,000 units last month, the Commerce Department's Census Bureau said on Thursday. The sales pace for May was unrevised at a rate of 623,000 units.

Economists polled by Reuters had forecast new home sales, which make up more than 10% of U.S. home sales, would rise to a rate of 650,000 units. New home sales, which are counted at the signing of a contract, are volatile on a month-to-month basis and subject to big revisions.

They fell 6.6% on a year-over-year basis in June. The average rate on the popular 30-year fixed-rate mortgage has hovered just under 7% this year after the Federal Reserve paused its interest rate cuts amid concerns that President Donald Trump's protectionist trade policy would stoke inflation.

Having mortgage rates hovering around the elevated 7% level has been a contributing factor to the ongoing sluggishness of the new home market. The prolonged new home affordability crisis is weighing on the business outlook for new homebuilders.

“Buyers are increasingly moving to the sidelines due to elevated mortgage rates and tariff and economic uncertainty,” said Buddy Hughes, NAHB chairman and a homebuilder from Lexington, North Carolina, in a release. “To help address affordability concerns and bring hesitant buyers off the fence, a growing number of builders are moving to cut prices.”

If there is a positive for new home affordability, it's that the number of unsold new homes is rising, with homebuilders increasingly taking steps to lower their prices as they attempt to increase sales. Through June 2025, those actions haven't yet been enough to change the recent uptrend in new home prices, but we'll see how well new homebuilders adapt with their changes in pricing strategy in the months ahead.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 24 July 2025. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 24 July 2025. 

The United States' new home affordability crisis worsened slightly in May 2025, as a higher median new home sale price combined with an increase in the nation's average mortgage rate.

The negative development means the monthly mortgage payment for the median new home sold in the United States once again consumes more than 36% of the pre-tax income of a household earning the median household income. May 2025 represents the 38th consecutive month in which the typical new home sold in the U.S. has been beyond the affordable grasp of the typical American household.

Here are the numbers being that assessment for May 2025. The initial estimate of the median sale price of a new home sold in the U.S. during the month is $426,600. Meanwhile, the 30-year conventional fixed rate mortgage carried an average interest rate of 6.82% during the month. For a household taking out a mortgage with a zero-down payment [1], the principal and interest portion of their mortgage payment would total $2,423.

That mortgage payment would consume about 40.1% of the monthly income earned by a household at the exact middle of the U.S. income distribution in May 2025. As such, it exceeds the upper threshold of affordability that lenders have historically used to determine whether they will loan money to a household that has no other debt. For households that do carry other debt, lenders prefer their monthly mortgage payments consume no more than 28% of their pre-tax household income. Mortgage borrowers have more financial resilience to deal with unexpected expenses when their mortgage payments fall below these affordability thresholds.

The latest update of our chart tracks the changing relative affordability of the typical new home sold in the U.S. is for the typical American household with respect to the mortgage lending industry's key affordability thresholds from January 2000 through May 2025.

Looking ahead to June 2025, the interest rate for the average 30-year conventional fixed rate mortgage held steady at 6.82%, which means borrowing costs remain elevated. With mortgage rates stuck, for the affordability of new homes to improve, one or more of the following two things would need to happen:

• A decline in the price of the median new home sold in the U.S.
• A significant increase in the income earned by the median household.

About the New Home Affordability Crisis

The affordability crisis for new homes has its origin in the high inflation that was unleashed by the Biden-Harris administration's policies in March 2021. Although it rose slowly at first, the cost of monthly mortgage payment began to skyrocket after December 2021. As a percentage of median household income, the monthly mortgage payment for a new home climbed above the key 36% threshold of relative affordability in April 2022, remaining above it in every month since.

Notes

[1] We use the zero-down payment scenario because it provides a simple way to account for the opportunity costs of paying a down payment when buying a new home for many homebuyers. Meanwhile, there are several lending programs for qualified homebuyers that do provide a zero-down payment option to try to make buying a home more affordable.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 25 June 2025. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 25 June 2025. 

Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 27 July 2025. Note: Starting from December 2022, the estimated monthly mortgage rate is taken as the average of weekly 30-year conventional mortgage rates recorded during the calendar month.

Image Credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a sign advertising a new home for sale with a gasoline pump meter labeled 'MONTHLY MORTGAGE PAYMENT'", which we followed up with a second prompt: "Remove the nozzle and hose from the gas pump. Also change the number in the meter to 2423".

Political Calculations' initial estimate of the total market capitalization of new homes sold in the United States ticked up May 2025. The first estimate of the time-shifted trailing twelve month average of the total value of new homes sold during the month is $28.86 billion.

This figure represents an increase of 2.1% from our revised estimate of $28.26 billion in new homes sales in April 2025. The April 2025 data was revised upward from the initial estimate of $28.22 billion we presented last month.

The following charts present the U.S. new home market capitalization, the number of new home sales, and their sale prices as measured by their time-shifted, trailing twelve month averages from January 1976 through May 2025. The data for May 2025 indicates the new home market gained from higher sale prices and not a higher number of sales, which is not a good sign for homebuilders.

Falling new home sales trend:

Rising trend for home prices:

Reuters describes how the relative unaffordability of new homes is contributing to homebuilder woes:

Sales of new U.S. single-family homes fell by the most in nearly three years in May as high mortgage rates and rising economic uncertainty sapped demand, lifting the supply of unsold houses on the market to the highest level since late 2007.

The larger-than-expected decline in sales reported by the Commerce Department on Wednesday added to weak homebuilding and tepid sales of previously owned homes last month in suggesting that housing would subtract from gross domestic product in the second quarter after being neutral in the January-March quarter.

Mortgage rates have risen since bottoming in March 2025, contributing to the headwinds of affordability for new home buyers although they remain below the 7% threshold. We'll take a separate look at the relative affordability of new homes nationally within the next two weeks.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 23 May 2025. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 23 May 2025. 

Image credit: New Home Construction, Georgia USA by Paul Brennan on PublicDomainPictures.net. Creative Commons Creative Commons - CC0 Public Domain.

The typical house sold in each the fifty states is out of the affordable reach of the typical American household.

That's the main takeaway from Visual Capitalist's Dorothy Neufeld's infographic displaying the relative affordability of the median home sold in each state for a household earning the median income in each state. Here's the infographic:

Among all the states in this snapshot, Iowa comes closest to being affordable, while Montana, which has seen home prices rise rapidly in recent years, qualifies as the least affordable:

Iowa ranks as the most affordable state in the nation, with a median listing price of $294,600.

Overall, its home price to income ratio is among the lowest nationally, at 3.0. Despite single family home prices rising by 40% since 2020, prices remain affordable. Not only that, local jurisdictions in the state have issued more than 10,000 new housing permits annually since 2022.

By contrast, states with the lowest affordability scores included Montana, Idaho, and California.

In Montana, home prices have shot up 66% in the past four years—surpassing the 50% national average. As many have flocked to the state, it has drove up prices higher while wage increases have stagnated leading to a growing affordability crisis.

Neufeld is relying on the National Association of Realtors' analysis of home affordability, which is somewhat quirky. Their scale runs from 0 to 2, where a score of 1 represents the situation where a median income earning household can afford to buy the median priced home within the state. Scores below 1, as they are for all states by this measure, indicates the median income earning family cannot afford their state's median priced home. Here's how they describe the findings of their analysis:

We consider two correlated but distinct metrics for homeownership affordability in each state. The first is our REALTORS® Affordability Score, which can be explored here for data at a metro level. We calculate the score at the state level for the entire year of 2024, identifying what percentage of for-sale inventory in each state is affordable to households at varying points along the income distribution in that same state. The benefit of using the REALTORS® Affordability Score is that it measures housing affordability across the income spectrum. The score can range from 0 to 2, and a higher value indicates a more affordable market. Unfortunately, all 50 states and Washington, DC, score lower than 1 in this metric; Iowa comes in on top, at 0.92, and Montana is in last place, at 0.4.

We'll update our picture for the relative affordability of new homes at the national level within the next two weeks, but we anticipate the affordability crisis for new homes will enter its 38th consecutive month. Until then, it's interesting to see that every state is affected by that situation.

Image credit: Dorothy Neufeld. Mapped: U.S. Housing Afforability by State. Visual Capitalist. 29 May 2025.

The new home affordability crisis continued in April 2025 with a home affordability factor of 38.0%. The monthly mortgage payment for the median new home sold in the United States would consume more than 36% of the pre-tax income of a household earning the median household income, putting it in the very high danger zone for affordability. The affordability factor has been in this zone for the last 37 months.

The very high danger zone starts at 36%, which represents the upper threshold of affordability that lenders have historically used to determine whether they will loan money to a household that has no other debt. For households that do carry other debt, lenders prefer their monthly mortgage payments consume no more than 28% of their pre-tax household income. Borrowers have more financial resilience to deal with unexpected expenses when their mortgage payments fall below these affordability thresholds.

April 2025's affordability data remains within two percent of the upper threshold of affordability, which is close to being the most "affordable" a new home has been during the past three years. The latest update of our chart tracks the changing relative affordability of the typical new home sold in the U.S. is for the typical American household with respect to the mortgage lending industry's key affordability thresholds from January 2000 through April 2025.

The affordability factor of 38.0% is based on April 2025's initial median new home sale price of $407,200, an estimated median household income of $89,273, and an average 30-year conventional mortgage interest rate of 6.73%. Both the median new home sale price and the monthly mortgage rate ticked up slightly from March 2025's levels.

Looking ahead to May 2025, the interest rate for the average 30-year conventional fixed rate mortgage ticked up to 6.82%, which represents a headwind for new home affordability. Only a surge in household income or a decline in the median new home sale price would be able to counteract this headwind to improve new home affordability.

About the New Home Affordability Crisis

The affordability crisis for new homes has its origin in the high inflation that was unleashed by the Biden-Harris administration's policies in March 2021. Although it rose slowly at first, the cost of monthly mortgage payment began to skyrocket after December 2021. As a percentage of median household income, the monthly mortgage payment for a new home climbed above the key 36% threshold of relative affordability in April 2022, remaining above it in every month since.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 23 May 2025. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 23 May 2025. 

Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 1 June 2025. Note: Starting from December 2022, the estimated monthly mortgage rate is taken as the average of weekly 30-year conventional mortgage rates recorded during the calendar month.

Image Credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a forest service fire danger gage. The gage is for home affordability and the high danger limit is 36%. The gage is pointing to 38% in the high danger zone."

The total market capitalization of new homes sold in the United States dipped slightly in April 2025. Political Calculations initial estimate of the time-shifted trailing twelve month average of the total value of new homes sold during the month is $28.22 billion.

This figure is down just 0.4% from our revised estimate of $28.36 billion in new homes sales in March 2025. The March 2025 data was revised upward from the initial estimate of $27.87 billion we reported last month.

The following charts present the U.S. new home market capitalization, the number of new home sales, and their sale prices as measured by their time-shifted, trailing twelve month averages from January 1976 through April 2025. The trends they show suggest the new home market is starting to reverse its general downtrend since July 2024.

Flattening new home sales trend:

Flattening trend for home prices:

The transition from a falling to a flat trendline in the trailing twelve month averages comes as the reported number of new home sales surged in April 2025. Seeking Alpha summarized April 2025's underlying monthly data that fed into our overall estimate of the market cap for new homes:

U.S. new home sales jumped 10.9% M/M to 743K in April, rising from 724K in March and surging past the 700K consensus estimate, according to data released by the U.S. Census Bureau on Friday. The increased sales rate led to an increase in the median sales price and a reduction in inventory.

On a Y/Y basis, new home sales rose 3.3%.

The median sales price of new houses was $407.2K, up 0.8% from March's $403.7K and below April 2024's price of $415.3K. The average sales price of new houses, though, was $518.4K, 3.7% higher than the previous month and 3.6% above April 2024's level.

If the numbers hold, April 2025's new home sales will be the highest recorded since February 2022. New home sales data is subject to frequent revisions before being finalized, where the size of revisions can be significant.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 23 May 2025. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 23 May 2025. 

Image credit: Photo by Ironman on Unsplash.

Three years ago, U.S. mortgage rates surged past the point where they put new homes outside of the affordable reach of the typical American household. Combined with the Biden-era inflation of new home prices, the majority of American households have not been able to afford the typical new home sold in the U.S. since March 2022.

Put another way, March 2025 represents the 36th consecutive month in which the monthly mortgage payment for the median new home sold in the United States would consume more than 36% of the pre-tax income of a household earning the median household income.

That's the upper threshold of household income that mortgage lenders use to determine whether they will lend to a household that has no other debt. For households that do carry other debt, many lenders prefer their monthly mortgage payments consume no more than 28% of their pre-tax household income.

This isn't saying much, but there is a bright side in the March 2025 affordability data. At 37.5% of median household income, it is within striking distance of falling below the upper threshold of affordability. The latest update of our chart tracks the changing relative affordability of the typical new home sold in the U.S. is for the typical American household with respect to the mortgage lending industry's key affordability thresholds from January 2000 through March 2025.

This affordability factor is based on March 2025's initial median new home sale price of $403,600, an estimated median household income of $82,971, and an average 30-year conventional mortgage interest rate of 6.65%.

Looking ahead to April 2025, the interest rate for the average 30-year conventional fixed rate mortgage ticked up to 6.73%. Assuming median household income is unchanged, the median sale price of new homes sold in the U.S. would have to fall by 4.6% to $385,000 to cross the upper threshold of affordability for a household in the exact middle of the U.S. income distribution.

Alternatively, if both the median sale price of a new home and median household income remains unchanged, the average mortgage rate would have to decline to about 6.27% for the median new home to drop to the upper limit of affordability.

About the New Home Affordability Crisis

The affordability crisis for new homes has its origin in the high inflation that was unleashed by the Biden-Harris administration's policies in March 2021. Although it rose slowly at first, the cost of monthly mortgage payment began to skyrocket after December 2021. As a percentage of median household income, the monthly mortgage payment for a new home climbed above the key 36% threshold of relative affordability in April 2022. The relative affordability of new homes has remained above this level for 36 consecutive months.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 23 April 2025. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 23 April 2025. 

Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 9 May 2025. Note: Starting from December 2022, the estimated monthly mortgage rate is taken as the average of weekly 30-year conventional mortgage rates recorded during the calendar month.

Image Credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a carnival sign that says you must be able to pay up to 36% of your income to have a mortgage".

The U.S. new home market may have grown for the first time since July 2024.

The data for March 2024 is preliminary and will be revised several times before being finalized over the next several months. That said, our first estimate of the time-shifted trailing twelve month average of the total value of new homes sold in the U.S. during March 2025 is $27.87 billion. If it holds, it will represent the first month-over-month increase in new home sales since they peaked in July 2024 at a finalized figure of $28.90 billion.

Revisions can be significant. Our initial estimate of the market capitalization of new homes sold in July 2024 was $31.30 billion, which ultimately proved to be overstated by over 7.6%. In the months since we first reported that first estimate, the number of new homes sold reported by the U.S. Census Bureau has been revised substantially lower, accounting for most of the downward change, with much smaller downward revisions in the average new home price accounting for the balance.

The following charts present the U.S. new home market capitalization, the number of new home sales, and their sale prices as measured by their time-shifted, trailing twelve month averages from January 1976 through March 2025.

Falling-to-flat new home sales trend:

Slow downtrend for home prices:

The big question is will this mark the beginning of the end of what has been a downward trend? While it's too early to make that determination at this time, we think the downward trajectory was interrupted by mortgage rates dropping to their lowest levels in months during March 2025, improving their affordability and boosting sales. In recent weeks however, mortgage rates have increased, which suggests the downward trend for new home sales has not yet been broken.

We'll take a closer look at how the relative affordability of new homes for the typical American household changed in March 2025 sometime early next month.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 23 April 2025. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 23 April 2025. 

Image Credit: Photo by Jennifer Kalenberg on Unsplash.

The cost of owning the typical new home sold in the United States remained fully out of the affordable reach of the median income-earning household for the 35th consecutive month in February 2025.

However, relative affordability of the monthly mortgage payment for the median priced new home sold during the month improved slightly as both mortgage rates and the median new home price declined while median household income increased. Altogether, we estimate the monthly mortgage payment would consume 39.3% of the monthly income of the typical U.S. household in February 2025.

While that's a decline from January's initial estimate of 42.9%, because it exceeds 36% of the median household's pre-tax income, the upper threshold of household income that mortgage lenders use to determine whether they will lend to a household that has no other debt, we find newly built homes continue to be unaffordable.

The latest update of our chart tracks the changing relative affordability of the typical new home sold in the U.S. is for the typical American household with respect to the mortgage lending industry's key affordability thresholds from January 2000 through February 2025.

This affordability factor is based on February 2025's initial median new home sale price of $414,500, an estimated median household income of $82,886, and an average 30-year conventional mortgage interest rate of 6.84%.

There is a real potential for improvement in affordability because the average mortgage rate for March 2025 is 6.65%. Whether that potential improvement is realized will hinge on what happens with new home sale prices, for which we won't have data until near the end of April 2025.

About the New Home Affordability Crisis

The affordability crisis for new homes has its origin in the high inflation that was unleashed by the Biden-Harris administration's policies in March 2021. Although it rose slowly at first, the cost of monthly mortgage payment began to skyrocket after December 2021. As a percentage of median household income, the monthly mortgage payment for a new home climbed above the key 36% threshold of relative affordability in April 2022. The relative affordability of new homes has remained above this level for 35 consecutive months.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 26 March 2025. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 26 March 2025. 

Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 29 March 2025. Note: Starting from December 2022, the estimated monthly mortgage rate is taken as the average of weekly 30-year conventional mortgage rates recorded during the calendar month.

Image credit: Stable Diffusion DreamStudio Beta. Prompt: "House keys next to miniature house, mortgage payment, highly detailed, photorealistic".

The U.S. new home market continued shrinking for the seventh consecutive month in February 2025.

We estimate the total valuation of new homes sold in the U.S. last peaked in July 2024 at approximately $28.91 billion. Political Calculations' first estimate of the time-shifted trailing twelve month average of the market capitalization of new homes sold in February 2025 is $26.77 billion.

Over the last seven months, a combination of downward revisions has combined with falling new home sales and flat-to-slowly falling new home prices to result in this outcome.

The downward revisions in the data during this period have been significant. There was a brief moment in August 2024 when it appeared the initial estimate of the market cap of new homes sold in the U.S. exceeded the December 2020 peak of $30.12 billion. Subsequent revisions however have changed that view to the negative.

Overall, there's now enough data to support the observation that at no time during the Biden-Harris administration did the volume and price of new home sales ever exceed the December 2020 peak. The U.S. new home market of February 2025 is effectively about 11% smaller than it was at that time. And it's still shrinking.

The following charts present the U.S. new home market capitalization, the number of new home sales, and their sale prices as measured by their time-shifted, trailing twelve month averages from January 1976 through February 2025.

Flat-to-falling new home sales trend:

Slow downtrend for home prices:

Speaking of initial new home sale price data that will be revised, here's how Reuters reported the initial data for February 2025:

New home sales increased 1.8% to a seasonally adjusted annual rate of 676,000 units last month, the Commerce Department's Census Bureau said on Tuesday. The sales pace for January was revised up to a rate of 664,000 units from the previously reported 657,000 units....

The median new house price fell 1.5% to $414,500 in February from a year earlier.

The median new house price is a figure that we use to measure the relative affordability of new homes. We plan to take a closer look at the affordability of new homes in February sometime next week.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 25 March 2025. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 25 March 2025. 

Image Credit: New home construction in Gilbert, Arizona photo by Jay Thompson on Flickr. Creative Commons CC BY-SA 2.0 Attribution-ShareAlike Generic Deed.