A new report shows that fewer than 30% of homes on the U.S. market are affordable for the typical American household, as rising mortgage rates continue to erode buying power.
According to Realtor.com’s latest Buying Power Report, only 28% of current listings are priced within reach of a median-income family.
As of August, the maximum affordable home price for the average household has dropped to $298,000.
That’s a nearly $30,000 decline from 2019, when it stood at $325,000—even though the median household income has increased by more than 15% in that same period.
Mortgage Rates Undermine Income Gains
The steep drop in affordability is being driven largely by higher mortgage rates. While income levels have risen, they haven’t kept up with surging borrowing costs. Realtor.com chief economist Danielle Hale said the typical household’s purchasing power is being directly undercut by interest rate hikes.
“Even as incomes grow, higher interest rates have eroded the real-world purchasing power of the typical American household,” Hale explained.
This is forcing many would-be buyers to reconsider their options—whether by downsizing, relocating farther from job centers, or delaying homeownership altogether.
The damage has been compounded by rising home prices. The typical U.S. listing now costs $439,450, far beyond what a median-income buyer can afford without a substantial down payment.
In 2019, a $320,000 mortgage could cover the cost of a median-priced home. Today, the same loan would require an additional 28% in cash to meet the price of a typical listing.
Monthly Payments Spike With Higher Rates
The average 30-year fixed mortgage rate has jumped from 2.65% in January 2021 to around 6.75% as of July.
That difference alone adds roughly $600 per month to the cost of a $320,000 mortgage—equivalent to $7,200 per year.
As a result, homebuying activity has fallen to its lowest level since the mid-1990s, according to the Joint Center for Housing Studies (JCHS) at Harvard University.
Affordability Declines in Major Metro Areas
Some of the hardest-hit housing markets include Milwaukee, Houston, Baltimore, New York City, and Kansas City. Each of these metros has seen buying power for the median household fall between 9% and 10.5% since 2019.
Milwaukee saw the sharpest decline, with the maximum affordable home price dropping from $314,000 to $281,000—a loss of $33,000 in buying power. In New York City, only 13.1% of homes on the market were considered affordable for the average household as of July.
While many regions are struggling, some metros have experienced modest gains in buying power.
Cleveland saw the largest improvement, with the maximum affordable price rising from $249,000 to $260,000—thanks in part to strong wage growth. Half of Cleveland’s housing inventory was still considered affordable in July.
Other metros with slight buying power gains since 2019 include Phoenix, Tampa, and Austin. However, even in these cities, the share of affordable listings remains lower than pre-pandemic levels due to sharp home price growth outpacing income gains.
