Housing Affordability Across the Country

Housing Affordability Across the Country

By Elaine Ng, Economic and Market Analysis Division Regional Director, Regions IX and X

Elaine Ng, Economic and Market Analysis Division Regional Director, Regions IX and X.

I am Elaine Ng, the field director of HUD's Economic and Market Analysis Division (EMAD) for regions IX and X in the Office of Policy Development and Research (PD&R). EMAD's field economists produce housing market reports, including Comprehensive Housing Market Analyses, Regional Narratives, and Housing Market Profiles for the U.S. Housing Market Conditions website, as well as Market at a Glance reports. 

Our research focuses on economic, demographic, and housing market trends that affect the demand for housing in local markets, and one growing trend we have seen as a strain on markets is the affordability of all types of housing. Housing affordability is now an issue that communities nationwide are grappling with, particularly as the COVID-19 pandemic shifted migration patterns and mortgage interest rates rose starting in 2022. 

When EMAD talks about housing affordability, we aren't referring just to home prices and rents, although both have increased significantly over the past 5 years. Rather, housing affordability generally has been defined as the ability of households to spend no more than 30 percent of their monthly income toward housing costs. In the sales context, the home price is the amount at which a house is sold, however, housing costs are what most homeowners will pay monthly for their homes and include expenditures toward principal and mortgage interest payments, property taxes, and homeowner's insurance premiums because most homeowners have a mortgage. Housing costs for renters generally consist of just rent and utility costs. As part of our commitment to measure and track housing affordability, EMAD has created affordability indices for both sales and rental markets. 

Sales Affordability Trends 

To measure sales affordability, EMAD uses the HUD Homebuyer Affordability Index, which is a ratio, or relative comparison, of the median income in an area to the income needed to afford the median-priced home, spending no more than 30 percent of income towards housing costs. An index higher than 1 indicates higher affordability in that an area's median income is greater than the income needed to afford the median-priced home (or spend no more than 30 percent of income on monthly housing costs), whereas an index of less than 1 indicates the opposite (lower affordability). 

As of the first quarter of 2025, homeownership was unaffordable in 17 states of the nation, reflecting a decline in affordability compared with the first quarter of 2020, when California was the only state in which homeownership was considered unaffordable. Figure 1 depicts the Homebuyer Affordability Index over time, representing less affordable states in pink and more affordable states in green. Housing affordability has declined significantly since the pandemic, with the shift becoming particularly pronounced during the first quarters of 2022 or 2023, depending on the state. The decline coincides with a sharp rise in the average interest rate for a 30-year, fixed-rate mortgage, which rose from 2.88 percent as of the first quarter of 2021 to 3.79 percent as of the first quarter of 2022 and further to 6.36 percent as of the same period in 2023 (Freddie Mac). 

As mentioned above, home prices are just one part of the index; incomes are the other major factor determining an area's affordability index value. Even in areas where home prices rise, sales housing can be affordable if income growth meets or exceeds home price growth. For example, in New Hampshire, where the median income rose 5 percent to $125,900 in the past year, the HUD Homebuyer Affordability Index declined from 0.96 as of the first quarter of 2024 to 0.93 as of the first quarter of 2025, because home prices and housing costs both increased 8 percent during this period. Although rising interest rates contributed to mounting homeownership costs across the nation, the dramatic increase in home sales prices further negatively impacted affordability. As of the first quarter of 2022 alone, the year-over-year increase in home prices ranged from 3 to 27 percent, and income growth ranged between 7 and 17 percent (Zonda and HUD Median Family Income data).

Despite home prices rising faster than incomes in every U.S. state from 2010 to 2020, housing affordability improved in 23 states. The increased affordability was primarily the result of declining housing costs because of historically low mortgage interest rates, which fell from 5.0 percent as of the first quarter of 2010 to 3.5 percent as of the first quarter of 2020. For example, in New Hampshire, where the median-priced home increased 11 percent from $240,600 during the first quarter of 2019 to $266,500 during the first quarter of 2020, housing costs increased only 4 percent because the interest rate declined from 4.4 percent to 3.5 percent. Despite an 11-percent gain in housing prices, the monthly principal and interest payment portion of housing costs remained nearly unchanged, resulting in very little change to the affordability of owning a home. Overall, the average annual change in housing costs for states in the nation ranged from a decline of 1 percent in Hawaii to an increase of 6 percent each in Arizona and Nevada, whereas average annual income growth for states ranged from 1 to 4 percent.

Figure 1: Homebuyer Affordability Index

Rental Affordability Trends

EMAD has created an index similar to HUD's Homebuyer Affordability Index called the HUD Gross Rent Affordability Index to measure affordability for renters, who generally have lower median incomes than homeowners. The index measures the ratio of the median income for renter households in an area to the income needed to afford a rental unit priced at the median gross rent, with no more than 30 percent of income paid toward rent. Again, an index value of 1 or above indicates that the median income for renters is sufficient to afford a rental unit priced at the median gross rent.

During 2023, the latest year for which data are available, rental housing was affordable in only 16 U.S. states, including the District of Columbia, down from 24 states as of 2019. Figure 2 depicts the rental affordability index, showing affordable states in purple and less affordable states in brown. Nearly one-half of the states with affordable rental markets during 2023 were in HUD's Great Plains or Rocky Mountains regions, including Kansas, Missouri, Montana, North Dakota, Nebraska, South Dakota, and Wyoming. Of the states that were affordable in 2019 but became unaffordable by 2023, Arizona experienced the largest decline in affordability and the greatest gap between median gross rent and median renter income. From 2020 to 2023, median gross rents in Arizona increased by an average of 10 percent annually — the largest increase of any state — while median incomes of rental households increased by an average of just 6 percent annually.

Despite the recent decline, rental affordability generally improved from 2010 to 2019. In 2010, only eight states had affordable rental markets, all of which (except Alaska) were in HUD's Great Plains or Rocky Mountains regions. Those same 8 states — Alaska, Iowa, Kansas, Montana, North Dakota, Nebraska, South Dakota, and Wyoming — have rental markets that have remained consistently affordable since 2010. During 2019, 16 additional states had affordable rental markets. In nearly all HUD regions, at least one state was affordable during 2019, except for the New York-New Jersey and Mid-Atlantic regions.

Figure 2: Rental Affordability Index

If you are interested in housing market conditions in your local area, check out our quarterly Regional Narratives, Housing Market Profiles, or Comprehensive Housing Market Analyses reports.