Housing affordability improves compared to 2025 despite home prices surge to new record high
Median home sale prices surged to a new record high in June, yet housing affordability actually improved compared to a year ago, creating what at first might seem like a paradox. To explain this contradiction, economists point beyond the raw price to a set of shifting economic factors affecting the budgets of today’s buyers, with income growth and mortgage rates emerging as the main linchpins.The June existing-home sales report from the National Association of Realtors released last week showed that the median existing-home sales price rose 1.8% year over year to reach an all-time high of $440,600.At the same time, the NAR Housing Affordability Index (HAI) registered at 102.3, up from 95.5 a year ago, at the national level, indicating an improvement in affordability.Affordability also improved in all four regions, with the well-supplied West as the frontrunner with an 8.9% gain, followed by the South (+8.3%).Even the inventory-constrained Midwest (+6.2%) and Northeast (+4.5%) recorded modest upticks in affordability.NAR’s affordability index measures whether a U.S.
family earning a median family income, as reported by the U.S.Census Bureau, could qualify for a mortgage on a median-priced single-family home.An HAI value of 100 means that the family has exactly enough income to qualify for a mortgage on a median-priced home.
An index exceeding 100 means that the family has more than enough income to afford a median-priced home, assuming a 20% down payment.Median family income estimates are based on the average of wage growth and last year’s actual income growth.For example, in January, HAI jumped to a nearly four-year high of 116.5, signifying that a family earning a median income had 116.5% of the income necessary to qualify for a conventional mortgage on a median-priced home.Notably, the affordability index has been declining over the past six months, but it is still roughly 7 points higher than in June 2025.According to experts, the year-over-y...