New NAHB data: Housing affordability hits fresh lows as mortgage rates climb

What NAHB’s Cost of Housing Index says

NAHB’s latest Cost of Housing Index (CHI) shows affordability worsened in **Q2 2026**, reversing three quarters of modest improvement. Nationally, a family earning the median income of **$106,800** needed **34%** of income to cover the mortgage payment on a median-priced **new** home, while a low-income family (50% of median) would need **67%**. For **existing** homes, the shares were higher: **36%** for a typical family and **71%** for a low-income family. [nahb.org][eyeonhousing.org]

The shift wasn’t just about rates. NAHB attributes the Q2 drop to a combination of higher mortgage rates, construction costs, and broader market uncertainty. In the CHI framework, the mortgage payment assumes **10% down** plus taxes, insurance, and PMI—so even small moves in rates or prices can show up quickly in the share-of-income math. [nahb.org]

At the metro level, the burden remains extremely uneven. NAHB’s Q2 tables show several markets where a typical family would be considered severely cost-burdened under HUD’s 30%+ definition, including top-burden markets where the mortgage payment can consume well over half of income. [nahb.org]

Why prices aren’t falling enough (yet)

One reason affordability is proving stubborn is that national home prices, in aggregate, aren’t actually falling much. ResiClub’s analysis of the Zillow Home Value Index shows nationally aggregated U.S. home prices were **up 1.1% year over year between July 2025 and July 2026**—a ‘soft’ market, but still positive. In that same window, **64 of the 300 largest markets** posted year-over-year declines, while **236** posted gains. [resiclubanalytics.com]

That split matters for buyers. In markets where inventory has moved above pre-2019 levels (ResiClub points to pockets of Texas, Florida, and Colorado), price corrections and flat prints are more common. In many Northeast and Midwest markets where inventory remains well below 2019, prices have been more resilient. [resiclubanalytics.com]

What local responses look like

With affordability pressure persisting, some cities are reconsidering how much housing their zoning can realistically allow. In San Jose, planners advanced a framework to study higher residential density limits—potentially lifting neighborhood density caps from about **8 homes per acre** to options as high as **32 homes per acre**, with additional work on parking and implementation details over the coming year. [sanjosespotlight.com]

The practical point: zoning capacity doesn’t equal immediate supply. Even when a city increases allowed density, projects still have to pencil out amid financing costs, construction costs, and local infrastructure constraints. That lag helps explain why affordability can deteriorate even while policy discussions accelerate.

How to interpret ‘affordability’ in 2026

Two thresholds are useful when comparing reports:

• HUD’s common definition of **cost-burdened** is paying **more than 30%** of income on housing
• **Severe** cost burden is **more than 50%** [nahb.org]

In today’s rate environment, affordability often hinges on the interaction of three variables: mortgage rates, local price levels, and household income. When rates rise faster than prices fall—or when prices simply stay sticky—affordability can slide even in a ‘soft’ market.

**What to watch next:** whether mortgage rates ease meaningfully (which would improve payment-to-income ratios quickly), and whether inventory growth broadens beyond a subset of metros.