The American dream of owning a home is becoming increasingly difficult to reach. According to a new housing affordability analysis from Realtor.com, highlighted by Fox Business, only 28% of homes on the U.S. market are affordable for the average household a dramatic shift compared to just a few years ago.
Rising mortgage rates, higher home prices, and slower wage growth have combined to create one of the most challenging homebuying environments in over a decade.
Affordability Gap Widens as Costs Outpace Income
In 2019, a median-income family could afford a home worth roughly $325,000. Fast-forward to today, and that same family can only afford a home worth around $298,000 a drop of nearly $30,000 in buying power.
Even though wages have increased by about 15.7% since then, those gains haven’t kept pace with the surge in home costs and mortgage interest rates.
What this means in practice:
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A typical household would now struggle to compete for the majority of homes on the market.
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Buyers are being priced out of neighborhoods that were previously within reach.
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Many are forced to downsize, delay purchases, or look to less competitive markets.
Mortgage Rates Are the Game Changer
Perhaps the single biggest factor driving this affordability crisis is the jump in mortgage rates:
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January 2021: 30-year fixed mortgage rates were around 2.65%.
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July 2025: Rates rose to nearly 6.75%.
This increase drastically affects monthly payments.
For example, a $320,000 loan that used to cost roughly $1,289 per month now costs about $1,890 an increase of $600 monthly, or more than $7,000 extra per year.
These added costs mean that even buyers who qualify for a loan are often forced to scale down their expectations, making competition for affordable listings even fiercer.
The Down Payment Barrier
It’s not just monthly payments that are rising. The upfront costs of homeownership are also climbing.
To buy a median-priced home today (about $439,450), buyers are expected to make a down payment of around 28% a significant jump from past years.
For many first-time buyers, this represents tens of thousands of dollars in upfront cash. Combined with elevated monthly payments, the dream of homeownership can feel out of reach.
Not All Markets Are Equal: Regional Gaps Emerge
Affordability isn’t uniform across the U.S. Some regions are hit harder than others:
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New York City: Only 13.1% of listings are affordable to the median-income household.
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Cleveland: Buying power actually improved slightly, with the affordable price range rising from $249,000 to $260,000 thanks to local wage growth.
However, even in the most “affordable” metros, affordability remains below pre-pandemic levels. Buyers in many parts of the country are facing limited inventory and intense competition for lower-priced homes.
What This Means for Renters and Property Managers
When homeownership becomes less attainable, more households turn to renting either by choice or necessity. This trend can have several ripple effects on the housing market:
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Increased demand for rentals
As more buyers are priced out, rental occupancy rates may rise, especially in desirable urban and suburban markets. -
Strain on rental affordability
More demand can push rental prices higher, making it harder for lower-income renters to find affordable housing. -
Longer-term renters
Households that might have bought in previous years are now staying in the rental market longer, changing tenant behavior and lease renewal patterns. -
Investment property opportunities
Investors may see increased demand for single-family and multi-family rentals, but must balance this with tenant affordability and economic uncertainty.
Strategic Shifts Buyers Are Making
Faced with rising costs, many Americans are adapting their strategies:
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Expanding their search radius to find homes in lower-cost areas outside major cities.
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Buying smaller homes or those needing renovation to stay within budget.
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Delaying purchase plans, hoping for lower interest rates or price corrections.
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Exploring shared ownership or family-assisted financing options.
Others are opting to remain renters longer either saving for a larger down payment or waiting for more favorable economic conditions.
The Bigger Picture: Why This Matters
The current affordability crunch doesn’t just impact individual buyers it shapes the housing market:
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Homeownership rates may stagnate or decline.
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Wealth-building opportunities for younger generations may be delayed.
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Rental markets will likely tighten, leading to upward pressure on rents.
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Policymakers may face growing pressure to address affordability through zoning reform, interest rate strategies, or housing subsidies.
Key Takeaways
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Only 28% of U.S. homes are now affordable to the typical household.
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Mortgage rates have nearly tripled since 2021, adding $600+ in monthly payments.
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Down payments and listing prices are creating further barriers for first-time buyers.
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Regional differences exist, but no market has fully escaped the affordability crunch.
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Renters, investors, and property managers are all impacted by this shifting housing landscape.
Source: “Only 28% of US homes now affordable for typical American household as buying power drops.” Fox Business. August 21, 2025. Read full article here