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“Priced out” gaps for new homes vary widely by race, ethnic groups

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Affordability challenges for new home buyers continue to be more pronounced for minority households, according to the latest “priced out” estimates by the National Association of Home Builders (NAHB).

Only 24% of Black households can afford a new home at the U.S. median price of $346,577, according to an analysis by NAHB. Hispanic households fare better with 32% of this segment being able to afford the mid-priced new home.

Among non-Hispanic white households, 44% have sufficient income to qualify for a mortgage using standard underwriting criteria. Asian households claim the largest share, at 56%.

The impact of a $1,000 price increase varies among different racial/ethnic groups, but NAHB reported it is essentially proportional to population size. The largest priced-out number as a result of a $1,000 price bump is 106,278 for non-Hispanic white households, which account for about two-thirds (67%) of total U.S. households. Some 15,840 Black households and 21,376 Hispanic households would be priced out of the market due to a $1,000 price hike.

Affordability gaps between non-Hispanic white households and minority households persist across all states. NAHB analysts said the higher the home price, the smaller the number of households that can afford new homes.

The home builders’ researchers noted the share of households that can afford new homes is largely affected by the state’s median new home prices, emphasizing more affordable markets do not mean housing is equally affordable to all ethnic groups.

Not surprisingly, income plays a key role in housing affordability and priced out” gaps. Differences in income distribution among race/ethnicity are large. An estimated 17.6% of non-Hispanic white households earn more than $150,000 annually, while only 7% of Black households are in that category.

At the lower end of the income spectrum, around 30% of Black households have incomes below $25,000, about twice as many as non-Hispanic white households.

Rising interest rates can also price out households. NAHB’s 2020 priced-out estimates indicate around 1.3 million households would no longer afford new median-priced homes if mortgage rates rose from 3.75% to 4% nationwide.

Households Priced Out of the Market by a $1,000 Price Increase, 2020 
Washington vs. Nearby States

SateMedian New Home PriceIncome Needed to Quality#Hoseholds#Priced Out%Priced Out
United States$344,65285,533124,488,189158,85712.76%

NAHB’s priced-out calculations assume a 10% down payment and a 30-year fixed rate mortgage at an interest rate of 3.75% with zero points.

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