Affordability Crisis Worsens as Home Prices Hit ‘Shocking’ New High—5 Times What the Typical Household Earns

The U.S. housing affordability crisis deepened last year, triggering the first decline in the national homeownership rate since 2016.

Existing and aspiring homeowners alike faced major economic headwinds in 2024 and at the start of 2025, as home prices nationwide rose nearly 4% year over year and a staggering 60% since 2019, according to the annual State of the Nation’s Housing report from the Joint Center for Housing Studies (JCHS) of Harvard University.

As a result of the surging prices, the typical existing single-family home hit a new record high of $412,000 in 2024

“This is a shocking five times the median household income,” said Daniel McCue, a senior research associate at the JCHS who co-authored the 2025 report. “This is also significantly above the price-to-income ratio of three that has traditionally been considered affordable.”

During a live-streamed presentation of the sobering assessment held at the Federal Reserve Bank of Boston on Tuesday, McCue noted that only three of the nation’s 100 largest metros—Akron, OH, McAllen, TX, and Toledo, OH—saw price-to-income ratios below 3.

In some parts of the U.S., including Los Angeles and Miami, the price-to-income ratios were 8 and above, meaning that the median home in those metros cost eight times what the typical local household earned annually.

Meanwhile, monthly mortgage payments on the median-priced home rose by $90, to $2,570 a month, assuming terms typical for first-time homebuyers, which include a 30-year loan with a 3.5% down payment.

For context, this record-breaking mortgage payment is roughly 40% higher than in 1990 when adjusted for inflation.

Homeownership rate plummets

To afford the sky-high mortgage payment of $2,570, the typical buyer would have to earn at least $126,700 a year. However, as of 2023, only 6 million of the nation’s 46 million renters met that annual income threshold, according to the latest American Community Survey.

While home prices vary across different U.S. markets, in over half (53%), a buyer would have to earn at least $100,000 annually to afford the median-priced home.

Perhaps unsurprisingly, given the plethora of affordability challenges plaguing today’s consumers, the U.S. homeownership rate fell in 2024 for the first time in eight years, to 65.6%, and then continued spiralling downward to 65.1% in the first months of 2025, according to the report.

Notably, the largest decline occurred among households under the age of 35 that tend to be first-time buyers, signalling that younger Americans are being priced out of homeownership.

“We’re really at a point where we need more housing, we need more affordable housing, but the market is not really very conducive,” said Chris Herbert, managing director of the JCHS, during a panel discussion of the new report.

As prices spiked, existing-home sales plunged to a 30-year low, with just 4.06 million closings recorded last year. According to the JCHS report, the slowdown in sales was in part due to the “lock-in effect” involving existing homeowners unwilling to part with their below-market mortgage rates in the current high-rate environment.

The sole bright point in the otherwise bleak report was that new-construction home sales ticked up 3% year over year—but McCue pointed out that those gains were made possible in large part due to price cuts and incentives used to attract buyers.

According to a May 2025 survey by the National Association of Home Builders, 61% of builders offered some kind of sales incentive and 34% reduced prices outright.

Property taxes and home insurance costs are rising

Besides soaring home prices and mortgage payments, buyers and owners are forced to contend with rapidly rising property taxes and insurance costs.

Home insurance premiums jumped 57% from 2019 to 2024, according to Freddie Mac. The most dramatic increases were seen in areas most susceptible to climate-related disasters.

In Miami, insurance premiums were three times the national average, adding an estimated $900 per month to the cost of a median-priced home.

Meanwhile, in Boston, a combination of taxes and insurance costs added roughly $1,000 per month on top of the typical home’s principal and interest payments.

“It all points to the fact that now is not the time to step back but to step up efforts to increase affordability, lower housing costs, and address the ever-growing needs of the nation’s households,” said McCue.

Clark Ziegler, executive director of the Massachusetts Housing Partnership, a nonprofit that finances affordable homeownership and rental housing, said what troubles him the most about the JCHS’s latest findings is that the affordability crisis is affecting the entire country, not just high-priced “coastal” markets like San Francisco and New York City.

“We need our hair on fire around housing costs,” said Ziegler. “We need to be deadly serious about creating different options, disrupting this industry that, honestly, has been doing things the same way for decades, if not half a century or longer.”

Ziegler added: “We have to find a way to meet people where they are, produce products they can afford, and shake up the system—and I think we are just nowhere close to where we need to be in doing that.”