October 2023 saw mortgage rates spike along with the yields of U.S. Treasuries to their highest levels in years. Meanwhile, the price of a new home sold in the United States during that month dropped to its lowest recorded level since December 2021. Which of these factors do you suppose had the bigger impact in the tug of war determining how affordable new homes are?Before we continue this game, we’ll tell you that it was closely run thing. To give you a fighting chance, it might help to have some numbers for reference. The initial estimate of the median cost of a new home sold in the U.S. was $409,300 in October 2023, which if it holds through at least three more months of revisions, would be the lowest since the median new home cost of $410,000 was finalized for December 2021. October 2023’s median new home sale price is $13,000 less than the $422,300 figure that represents the second estimate for the cost of a median new home sold a month earlier.The average interest rate of a 30-year conventional fixed rate mortgage taken out during November 2023 was 7.62%, which is up from October 2023’s 7.20%. This is the highest average mortgage rate recorded for any month since November 2000.There’s a third component to the affordability question: median household income. Our initial estimate for this figure in October 2023 is $76,588, which compares with an inflation-adjusted $76,377 for September 2023. While that almost 0.3% month-over-month increase is small, it does slightly favor the median new home becoming slightly more affordable for the typical American household.Those are all the pieces needed to solve this month’s puzzle. Have you made your guess? The answer will be revealed in the following chart presenting the mortgage payment for a median new home sold in the U.S. as a percentage of median household income!chartAs we said, it was a very closely run thing, but the spike in mortgage rates more than offset the fall in new home prices and the small rise in median household income in October 2023. We find the mortgage payment for a median new home sold rose to 45.4% of our estimate of the U.S. median household income for October 2023, up a fraction from the 45.0% for September 2023’s revised figures.The good news is that the October 2023 spike in long-term U.S. Treasuries has dissipated and, along with it, the spike in 30-year mortgage rates that are linked to them. We already know the average 30-year conventional fixed mortgage rate for November 2023 is 7.44%, which is already looking to fall further in December 2023. The relative affordability of new homes should improve in upcoming months with this tailwind.The bad news is that any mortgage payment that consumes more than 36% of a household’s income is considered fully unaffordable. Since the measure of relative affordability is well above that threshold, we anticipate new homes will remain out of the affordable reach of the typical American household for many more months to come.ReferencesU.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 27 November 2023. U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 27 November 2023. Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 1 December 2023. Note: Starting from December 2022, the estimated monthly mortgage rate is taken as the average of weekly 30-year conventional mortgage rates recorded during the month.More By This Author:Dividends By The Numbers In November 2023 The S&P 500 Rises To Its Highest Point Of 2023 As Gloomier Outlook Puts 2024 Rate Cuts In View Median Household Income In October 2023