Housing Affordability Worsens for First-Time Buyers as Rates Rise
A family earning median income needs 34% of gross income to cover a new home mortgage in Q2 2026—up from 32% in Q1. Rising rates and higher home prices are pricing more households out of homeownership.
Affordability Slips After Brief Recovery
After three consecutive quarters of modest improvement, housing affordability worsened in the second quarter as higher mortgage rates, rising construction costs and economic uncertainty weighed on the market, according to the latest data from the National Association of Home Builders (NAHB)/Wells Fargo Cost of Housing Index (CHI).
The CHI results from the second quarter of 2026 show that a family earning the nation's median income of $106,800 needed 34% of its income to cover the mortgage payment on a median-priced new home. The percentage of a family's income needed to purchase a new home rose from 32% in the first quarter of 2026 to 34% in the second quarter, driven by a more than 30-basis point rise in the average mortgage rate and a 2% increase in the median price of a new home.
Existing Homes Worse than New Construction
Conditions are even tighter for buyers targeting existing homes. Affordability of existing homes moved lower than new homes for both median- and low-income families between the first and second quarter of this year. The CHI indices for existing homes were 36% and 71% in the second quarter vs 32% and 65%, respectively, in the first quarter. The affordability downturn was due primarily to a sharp increase in median home prices from the first to second quarter.
What This Means for Newcomers
If you're considering buying your first home as a newcomer, current conditions are challenging. Concerns over rising consumer prices and the ongoing conflict in the Middle East are applying upward pressure on rates, keeping them at their highest level so far this year. Most experts forecast rates staying in the 6.4–6.5% range through year-end. Consider renting first to establish credit and savings, and explore first-time buyer assistance programs in your target state.
Sources
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