In a clear signal of America's growing housing affordability crisis, the National Association of Home Builders (NAHB) reports that typical families are now spending an unsustainable portion of their income on housing while builder confidence has plummeted to a five-month low.

Housing Costs Reach Alarming Levels

According to the NAHB/Wells Fargo Cost of Housing Index (CHI), a family earning the nation's median income of $97,800 needed 38% of its income to cover the mortgage payment on a median-priced new home in the fourth quarter of 2024. The situation is even more dire for low-income families, who would need to spend a staggering 76% of their earnings to afford the same home.

"The Cost of Housing Index should serve as a wake-up call for policymakers on the need to enact policies that get at the core of the nation's housing affordability crisis," said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas.

The Department of Housing and Urban Development defines families as "cost-burdened" when they spend more than 30% of income on housing, and "severely cost-burdened" when housing costs exceed 50% of income. By these definitions, typical American families are now officially cost-burdened, while low-income families face severe cost burdens.

The CHI data revealed extreme regional disparities. In San Jose-Sunnyvale-Santa Clara, California, the most severely cost-burdened market, a typical family needs to spend 87% of income on mortgage payments. By contrast, in Decatur, Illinois, families need just 16% of their income for housing.

Builder Confidence Tumbles

The housing supply constraints driving these affordability issues aren't likely to improve soon. Builder confidence in the market for newly built single-family homes fell sharply to 42 in February, down five points from January, marking the lowest level in five months.

"While builders hold out hope for pro-development policies, particularly for regulatory reform, policy uncertainty and cost factors created a reset for 2025 expectations," Harris explained.

All three major components of the Housing Market Index declined in February, with expectations for future sales taking the biggest hit, plunging 13 points to 46.

Tariff Concerns and Regulatory Burdens

A major factor in declining builder confidence is uncertainty around tariffs. "With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs," said NAHB Chief Economist Robert Dietz.

The impact of this uncertainty was clear in the survey data: builder responses collected before a pause in proposed tariffs on goods from Canada and Mexico yielded a lower confidence reading of 38, while those collected after the announced one-month pause produced a score of 44.

Adding to cost pressures are regulatory inefficiencies that delay housing projects. In testimony before the Senate Environment and Public Works Committee, Harris told lawmakers that "most land developers have been forced to step away from particular parcels of land due to the uncertainty of being able to obtain the necessary permits."

Regulatory costs at federal, state, and local levels account for 24% of the final price of a new single-family home, according to a 2021 NAHB study.

Housing Starts Decline

These challenges have already impacted housing production. Overall housing starts decreased 9.8% in January to a seasonally adjusted annual rate of 1.37 million units, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

Single-family starts decreased 8.4% to a 993,000 seasonally adjusted annual rate, while multifamily construction fell 13.5%.

"The single-family home building market is facing competing concerns and opportunities for 2025," Dietz noted. "Given persistent affordability concerns, reducing inefficient regulatory costs would offer the best policy path to improve attainable housing supply and bring down shelter inflation."

Path Forward

NAHB is advocating for several policy changes to address the crisis, including:

• Eliminating burdensome regulations at all levels of government
• Addressing inefficient building material supply chains
• Overturning inefficient local zoning rules
• Establishing clear timeframes for environmental permits and consultations
• Creating certainty around the definition of federally regulated waters

"Enacting common sense regulatory reforms that will make compliance more efficient and less onerous will help home builders to better safeguard the environment and expand the availability of attainable, affordable housing for all Americans," Harris concluded.