The NAHB/Wells Fargo Cost of Housing Index puts the affordability crisis in context: how much of your income you need for a house now.
New findings from the latest NAHB/Wells Fargo Cost of Housing Index, a quarterly analysis of housing costs in the United States, paint the real picture of affordability facing homeowners and prospective buyers today.
A family earning the nation's median income of $106,800 now needs 36% of that income to cover the mortgage payment on a median-priced existing home ($434,900) and 34% for a new home ($410,700), up from 32% for both in the first quarter of 2026.
The CHI is calculated as the ratio of mortgage payment over median family income. The mortgage payment is calculated by taking the median home price (assuming a 10% down payment) and adding taxes, homeowners insurance, and private mortgage insurance (PMI).
As housing affordability worsens, this new information has many hopeful buyers wondering if they’ll be able to buy a home—now or ever.
Financial experts weigh in
The 28/36 rule and 30% income rule are two popular budget guidelines for homebuyers.
The first says to spend no more than 28% of your gross monthly income on housing and no more than 36% on total debt. The second caps housing at no more than 30%.
But given this new data, are those guidelines still realistic today? Financial experts are on the fence.
“Rules like the 28/36 rule or the 30% income rule are useful as a starting point, but they don’t tell you what will work for you in your unique circumstances,” explains Linda Grizely, a certified financial planner and financial wellness speaker.
She says the better question to ask is: “After I make my housing payment, do I still have enough left for everything else?” Grizely continues, “That includes regular essentials, saving for emergencies and retirement, paying down debt, enjoying life, and handling the additional expenses that come with owning a home.”
Stephen Kates, principal at Clocktower Financial Consulting, believes these guidelines remain important benchmarks for buyers to measure themselves against, especially in a market where housing costs can easily push buyers past their limits.
“Financial success is rarely about the little things, such as buying coffee or splurging on concert tickets once in a while. Housing, transportation, and high-interest debt need to be carefully controlled, or they can crowd out other necessities and savings,” he explains.
So, what about buyers facing mortgage payments that would exceed 30% of their income?
Kates concedes there is a breaking out—like when housing costs exceed 50% of income, the situation is critical and requires attention. “Costs need to come down, income needs to go up, or both,” he warns.
“There should never be a reason for someone to try to buy a home when housing costs would consume such a high percentage of their income. Even at lower levels, such as 30% to 40%, housing costs can crowd out other necessary spending or limit someone’s ability to save.”
(Realtor.com) Avoid these costly mistakes
Buyers should take extra care to avoid stretching their budgets too far.
“A mistake I often see is assuming that because a lender approves you for a certain loan amount, you can comfortably afford it. These are really two separate things to think about,” Grizely explains.
Another misstep is thinking that the mortgage payment is the only cost of homeownership. "Even if taxes and insurance are included in the payment, there are utilities, maintenance, repairs, upfront costs of furniture and decor, and sometimes HOA fees,” she says.
A buyer’s monthly payment and down payment should allow room for the unexpected. “I would rather see someone buy a little less house and still have breathing room. Draining your savings or creating a paycheck-to-paycheck scenario can add a lot of financial stress,” she explains.
Kates agrees that buyers should prepare for costs beyond the mortgage payment. He says many buyers mistakenly assume that everything will go perfectly after the purchase. “It probably won’t,” he explains. “Homes always have an issue or two, or need something you didn’t expect.”
That’s why Kates recommends maintaining a separate emergency fund throughout the purchase process. He cautions, “If all of your free cash goes into the down payment, you risk having to borrow more to fund any other unexpected expenses.”
How buyers can prepare for housing costs
What can prospective buyers do to make homeownership more manageable? Kates says finding ways to increase income or reduce other expenses can make a difference. “After the initial down payment, owning a home is primarily a cash-flow equation,” he explains.
They should also compare mortgage rates. “The total cost of choosing a less competitive mortgage rate can amount to thousands of dollars annually. Monthly costs can be reduced further by buying down the mortgage rate with points, assuming buyers have the spare cash available to pay for those points upfront,” he explains.
Kates says the least attractive option is to choose a less expensive home, but it can ultimately be the most effective way to lower housing costs.
Beyond cutting costs, Grizely suggests starting with a clear picture of what you can afford. “Before you start shopping based on purchase price or what a lender says you qualify for, figure out what monthly payment feels comfortable to you,” she explains.
One way to test it is to practice making the payment before you buy. "Start setting aside that extra amount each month, in a separate savings account. You'll find out what that payment feels like in real life, and you'll build up some extra savings at the same time.”