Home Affordability Improves Despite Record High Prices

Median home sale prices reached a new record high of $440,600 in June, a 1.8% increase year-over-year. Despite this surge, housing affordability has improved compared to the previous year, with the National Association of Realtors® (NAR) Housing Affordability Index (HAI) rising to 102.3 nationally, up from 95.5 in June 2025. This improvement indicates that a family earning the median income has more than enough income to afford a median-priced home, assuming a 20% down payment.

Economists attribute this counterintuitive trend to shifting economic factors, primarily income growth and mortgage rates. The HAI measures a family's ability to qualify for a mortgage on a median-priced home. An index above 100 signifies sufficient income. While the index has seen a decline over the past six months, it remains approximately 7 points higher than in June 2025. Affordability saw gains across all four U.S. regions, with the West leading at an 8.9% increase, followed by the South at 8.3%. Even the Midwest and Northeast regions experienced modest upticks of 6.2% and 4.5%, respectively.

NAR's Housing Affordability Index is calculated based on median family income, as reported by the U.S. Census Bureau, and the median-priced single-family home. Median family income estimates incorporate both wage growth and actual income growth from the prior year. For instance, in January, the HAI reached a near four-year high of 116.5, indicating a family with a median income possessed 116.5% of the income required to qualify for a conventional mortgage on a median-priced home. This sustained improvement in affordability, even amidst rising prices, suggests a complex interplay of economic forces influencing the housing market.