are calculated using data from the 2017 American Community Survey (ACS) summary files. Homeowner’s insurance rates are constructed from the 2016 ACS Public Use Microdata Sample (PUMS) 3. For the US as a whole, the property tax is $12 per $1,000 of property value and the homeowner insurance is $4 per $1,000 property value.
Under these assumptions, 32.7 million of the 122.5 million US households could afford to buy a new median priced home at $355,183 in 2019. A $1,000 home price increase thus will price 127,560 households out of the market for this home. These are the households that can qualify for a mortgage before a $1,000 increase but not afterwards.
The number of priced out households varies across both states and metropolitan areas, largely affected by the sizes of local population and the affordability of new homes. The table above presents the projected 2019 median new home price and the amount of income needed to qualify the mortgage, and the number of households could be priced out if price goes up by $1,000. Among all the states, Texas registered the largest number of households priced out of the market by a $1,000 increase in the median-priced home in the state (11,152), followed by California (9,897), and Ohio (7,341).
NAHB 2019 priced-out estimates also present how interest rates affect the number of households would be priced out of the new home market. If mortgage interest rate goes up, the monthly mortgage payments will increase as well and therefore higher household income thresholds to qualify a mortgage loan. When interest rates goes up from 2.85% to 3.10%, around 1.26 million households could no longer afford buying median-priced new homes. An increase from 4.85% to 5.10% could price approximately 1 million households out of the market. SCBJ
1 Private mortgage insurance premium (PMI) is obtained from the PMI Cost Calculator (https://www.hsh.com/calc-pmionly. html)
2 Median credit score information is shown in the article “Four ways today’s high home prices affect the larger economy” October 2018 Urban Institute https://www.urban.org/urban-wire/four-ways-todays-high-home-prices-affect-larger-economy
3 Producing metro level estimates from the ACS PUMS involves aggregating Public Use Microdata Area (PUMA) level data according to the latest definitions of metropolitan areas. Due to complexity of these procedures and since metro level insurance rates tend to remain stable over time, NAHB revises these estimates only periodically.