The new home affordability crisis in the United States entered its 41st consecutive month in August 2025. As it did, it attracted high level notice from Treasury Secretary Scott Bessent, who signaled the Trump administration will make addressing the crisis a top priority this fall.
Bessent signaled the administration may soon declare a national housing emergency to address elevated prices and a declining supply.
The move comes as new homes moved closer to the upper 36% of household income threshold 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 July 2025.
At 37.0% of median household income in July 2025, the mortgage payment for the median new home sold in the U.S. during the month is the closest it has been to the upper limit of affordability for the typical American household since April 2022.
It so close to that 36% threshold that we ran several scenarios to see how interest rates, the median new home sale price, and median household income would have to change it would take to pull it down to that relative affordability limit. Here are the results, which only assume a change in the factor indicated with no change in the other two factors from their July 2025 levels:
- The average 30-year conventional fixed rate mortgage in the U.S. would need to drop to 6.37% or less, or more than 0.35% from the average 6.72% we recorded for July 2025.
- The median sale price of new homes sold in the U.S. would have to drop at least 2.5% to $390,000.
- The income earned by a household at the exact middle of the U.S. income spectrum would have to rise at least 3% to $86,100.
For its part, the Trump administration has been putting pressure on the Federal Reserve to lower interest rates during the past several months. Beyond that, as part of whatever actions it may take as part of a national emergency declaration for housing affordability, administration officials are looking at making other changes at the margins:
Administration officials are looking at ways to standardize local building and zoning codes and lower closing costs, he said, adding that Trump could consider tariff exemptions for certain construction materials.
During his 2024 presidential campaign, Trump said he would address the housing crisis by making federal land available for housing development and by slashing regulations.
These proposed changes would lower the homebuilders' cost of building new homes. Overall, these changes would have a small effect on prices, but would be impactful in improving the relative affordability of new homes now that they are within striking distance of becoming affordable.
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 a 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 25 August 2025.
Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 7 September 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: Photo by Jakub Żerdzicki on Unsplash.
Labels: personal finance, real estate
Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:
ironman at politicalcalculations
Thanks in advance!
Closing values for previous trading day.
This site is primarily powered by:
CSS Validation
RSS Site Feed
JavaScript
The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.
Other Cool Resources
Blog Roll
