What percent of your monthly pre-tax income is consumed by your mortgage payment?
If the result of that math is 36% of your pre-tax income, provided you have no other debt, your home just barely qualifies as being affordable by mortgage lenders. If however your mortgage payment only eats up 28% or less of your gross monthly income, mortgage lenders will view your mortgage payment as being very affordable for you.
Anywhere in between these two percentages, which come from the 28/36 rule that mortgage lenders use to determine how big a mortgage payment a prospective homebuy can afford, your home is considered to be affordable provided it and your total debts don't exceed that upper 36% threshold. Which is to say that if you manage your household's total debt load well, the home you own is within your affordable reach.
In October 2025, the typical new home sold in the United States fell within the affordable reach of the typical American household for the first time since early 2022. New home sales price data for both November and December 2025 that was delayed by the Senate Democrats' government shutdown fiasco in the fourth quarter of 2025 recently became available. That price data, along with the latest median household income estimates for November and December 2025, confirm new homes fall between the 28% and 36% affordability thresholds for a household earning the median household income in those months. For three consecutive months, the cost of the typical new home sold in the U.S. has been within the affordable reach of the typical American household.
The following chart tracks the changing relative affordability of the typical new home sold in the U.S. from January 2000 through December 2025. It visually confirms the cost of owning a new home, while still on the high side, has returned to and stayed within affordable levels.
Falling mortgage rates have been a key part of the rise of affordability in these months. Looking forward, both January and February 2026 have seen the benchmark 30-year conventional fixed rate mortgage continue to fall, dropping below six percent in the final week of February 2026.
We won't get the median new home sale price data for January 2026 until later this month, but the trend of increasing affordability established since early 2025 remains favorable.
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. At least, until October 2025 when it finally dropped back below it.
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 20 February 2026.
U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 20 February 2026.
Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 2 March 2026. 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: Wooden family figures and house with keys on table photo by IGOR LOLATTO on Unsplash.
Labels: real estate
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