Nearly two-thirds of Americans can’t afford the construction costs of an average home

The fact that an overwhelmingly large number of Americans can’t afford a house is hardly breaking news.

What isn’t making news nearly enough is that the disparity between Americans’ income and housing costs is so out of whack that many don’t have the means for even the sheer construction of a house.

To determine what Americans can actually afford, Creditnews Research delved into the costs in the various stages of residential property construction and how they compare to Americans' purchasing power.

What we discovered puts America’s housing affordability crisis in a whole new perspective.

In fact, less than half of American families can afford the construction of a typical single-family house. And nearly one in four households can’t take out a mortgage for anything beyond the “shell” structure of a house.

Only half of U.S. households can afford just the construction of a newly built, move-in-ready house, excluding the costs of land, builder margins, and other components that go into the final sale price. This highlights just how big of a disparity exists between what Americans make and how much they have to shell out for a home.

Sam Bourgi

Senior Analyst at Creditnews

Construction cost affordability

While construction costs are just one component of the home sale price, many Americans struggle to meet even these expenses.

In 2023, the total cost of an uninhabitable “shell” structure of a single-family home—including site work, foundations, and framing—was $154,542. Shockingly, that price tag is beyond the means of 23.3% of American families.

Even those who can afford a shell can’t do much with it because it lacks exterior finishes, major systems rough-ins like plumbing and electrical, and interior finishes like insulation and drywall.

A move-in-ready house with all the above finishes, excluding outside structures, costs $367,836. Households would need a minimum income of $98,854 to purchase that property, assuming a 30-year fixed-rate mortgage of 6.5% and a down payment of 15%.

Based on these criteria, 50.1% of households couldn’t afford such a property.

Buyers looking for a turnkey house—which includes all the features of a move-in-ready house plus outside structures and landscaping—would need to spend $397,339.

A household has to muster up a minimum income of $104,975 to qualify for a mortgage on such a property. Unfortunately, 62.4% of households earn considerably less than that and so couldn’t afford it.

By far, the most expensive construction stage is the finishing phase, which includes exterior and interior finishes and major rough-ins. It adds a whopping $213,294 to the total construction costs.

The second most expensive stage is building the frame and foundations of a house, which costs around $154,542. The outside structures and landscaping are the least costly, contributing around $30,000 to the construction costs.

Existing homes don’t offer much reprieve

While newly-built homes are typically more expensive, the difference between the construction costs of a turnkey property and the final price of an existing home isn’t particularly big.

In December 2023, the median sales price of an existing house was $382,600. At this price point, the minimum income threshold needed to afford the typical existing home is around $101,800.

Similar to our findings above, slightly less than 50% of U.S. households would be able to afford an average existing home at current price levels, assuming a 15% down payment and 30-year fixed-rate mortgage of 6.5%.

Although housing seems to be unaffordable across the board, more buyers are turning to new builds as housing inventory hovers near record lows.

In 2023, new builds accounted for 12.3% of total home sales in 2023—the highest on record.