The affordable housing crisis has been ongoing since the Great Recession. Households across the U.S. are continuously faced with untenable housing costs, and recent statistics from the National Association of Home Builders (NAHB) show that this state of affordability is only worsening. Over 103.5 million American households have been priced out of the market in 2024. This is in part due to soaring house prices and high interest rates.
Although buying a median-priced home of $495,750 isn’t attainable for nearly three-quarters of U.S. households, building a house isn’t a viable option for most either, since the average cost to build a single-family home in the U.S. is currently $506,618.
For a better overview of the state of U.S. housing affordability in 2024, we have compared statistics from previous years, analyzed state-to-state data, and asked industry experts for their thoughts on the issue. We find out how people are adapting to the current situation and how lower interest rates and decreasing rental costs may lead to housing becoming more affordable before the year is out.
Households Who Can't Afford a Home Has Increased by 134% Over the Last 5 Years
Taking data from NAHB reports, we calculated the percentage increase of households who cannot afford to buy a median-priced home in the U.S. from 2020 to 2024. The number of households who can no longer afford a median price home has now surpassed 103.5 million, resulting in a growth of 134% since 2020.
However, the yearly increases are slowing down, having risen 7% from 2023 to 2024, compared to 10% between the two previous years and 16% before that.
This priced-out calculation considers a 10% down payment and a 30-year fixed-rate mortgage at an interest rate of 6.5%. From these calculations, it’s estimated that buyers would pay $151,098 more for a home today than they would have 5 years ago. What’s more, if mortgage rates were to rise to 6.75%, another 1.13 million households would be priced out of the market. 106,031 households would fail to afford a home if house prices were to increase by just $1,000.
This trend signifies a serious affordability crisis in the housing market. It means a large segment of the population is being squeezed out of homeownership, impacting demand, potentially slowing down sales, and possibly leading to a shift in the market towards smaller, more affordable housing options.
Over 80% of Households Are Unable to Afford a Median Price Home in 24 States
According to the data collected, it is estimated that households in every state, except for Mississippi, would need a six-figure income to afford a median-priced home in 2024. Over 80% of households in nearly half of the states cannot afford to buy a median-priced home. In Vermont, over 90% of households cannot afford a new median-priced home, as they would need an annual income of over $291,481 to qualify for a mortgage—more than double the mean family income of $102,413.
What Could This Mean for the Housing Industry?
According to 71% of experts surveyed for the Built-to-Rent 2024 Report, home affordability is the main reason for the increase in build-to-rent (BTR) homes. "The increasing unaffordability of homeownership is a major driver behind the surge in demand for build-to-rent communities", agrees Vincent. "These offer a stable, long-term rental option with amenities and community features that rival traditional homeownership."
Median renting costs reached a historic high of $2,053 in August of 2022, and then again reached nearly the same price in August of 2023. However, these costs have started to decline, with current prices averaging $1,987.
In 2024, 90% of markets are more expensive for ownership than renting. “When purchasing becomes infeasible for so many, renting long-term becomes the next best option”, says Michael Dinich, a financial advisor, personal finance expert, and Founder of Wealth of Geeks. If rental prices continue to decline while house prices remain high, renting may become an increasingly viable option for those who cannot afford to buy a home.
Additionally, “HUD offers different programs that assist low to moderate-income households in paying rent”, according to Bruce Nzerem, Director of Public Housing for the U.S. Department of Housing and Urban Development.
Multigenerational living is also on the rise due to the lack of affordable homes. “Multigenerational living continues to grow in San Diego and adding ADUs (Accessory Dwelling Units) is a very popular home improvement for families”, states Cantor.
Will Homes Become More Affordable?
For a housing recovery to occur, several conditions must be met. The inventory of homes for sale needs to increase significantly, and mortgage rates need to decrease. "In my opinion, we will see improvement after the election in the first quarter of 2025. Hopefully, there will be a reduction in interest rates and inflation can be curbed”, says Gregg Cantor, the President and CEO of Murray Lampert Design, Build, Remodel.
According to Greg McBride, Bankrate's chief financial analyst, rates are predicted to decrease steadily throughout the year, reaching 5.75% by the close of 2024.
Despite more resale homes entering the market, the inventory shortage remains severe and is likely to persist due to multiple headwinds. The U.S. needs to build 2 million homes to restore the American dream of homeownership. While new home construction has provided some relief, it has not been sufficient to close the inventory gap.
According to Dinich “we're unlikely to ever see pre-2020 levels again without major policy shifts. Renting and multi-generational homes seem here to stay as preferred alternatives to an overburdened purchasing market.”
What are the Solutions for Achieving Home Affordability in the Future?
As the housing affordability crisis intensifies, various organizations are proposing innovative solutions to address the issue. The NAHB has introduced a 10-point plan designed to reduce rent and homeownership costs. The plan includes eliminating excessive regulations, promoting skilled trades, fixing building material supply chains, expanding affordable housing tax credits, overturning inefficient zoning rules, alleviating permitting roadblocks, adopting cost-effective building codes, reducing local impact fees, easing developer financing, and updating employment policies for flexibility.
JPMorgan Chase has proposed expanding the Low Income Housing Tax Credit program, creating a new Neighborhood Homes Tax Credit, and building affordable housing practitioner capacity as key solutions to address the housing supply and affordability crisis.
According to the National Institute of Building Sciences (NIBS), efforts to tackle housing supply and affordability challenges involve advocating for smaller home construction and using federal programs like the Housing Supply Action Plan. The organization supports state and local initiatives promoting ADUs and duplexes while emphasizing improving energy efficiency through innovative home design and construction methods aimed at cost reduction. NIBS also recognizes zoning reforms as vital for broadening affordable housing choices across the country.
National Low Income Housing Coalition (NLIHC) proposes preserving and expanding the National Housing Trust Fund to allocate capital for building, rehabilitating, and preserving homes for extremely low-income households. They advocate for fair federal disaster recovery, equitable access to affordable housing, and the expansion of the Low Income Housing Tax Credit to better serve families in need.
Moreover, Vice President Harris has announced $5.5 billion to help create more affordable housing, support economic growth, build wealth, and tackle homelessness across America's communities.
Adam Graham is a construction industry analyst at Fixr.com. He has experience writing about home construction, interior design, and real estate. He communicates with experts and journalists to make sure we provide the most up-to-date and fact-checked information. He has been featured in publications such as Better Homes and Gardens, and written for various outlets including the National Association of Realtors, and Insurance News Net Magazine.