Sep 11, 2025
Buying a home has never been easy, but new data shows just how far out of reach the American dream has become. In fact, according to a new Realtor.com affordability report [1], the typical household can afford just 28% of homes on the market today. That means nearly three out of four listings are priced beyond what most buyers can reasonably handle.
Unfortunately, a combination of factors has put the typical home out of reach of most Americans by affecting their buying power, as the total amount of income they can afford to spend now buys them much less house.
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While many Americans know housing has become increasingly unaffordable, not everyone understands exactly why. Let’s take a closer look at the forces behind the decline in buying power, and which markets are struggling the most.
Homeowners can't afford homes in most markets
Realtor.com found that a median-income household can afford a maximum home price of about $298,000 — which is actually $30,000 less than in 2019.
The steep drop is largely due to higher mortgage rates. In 2019, average rates hovered between 3.5% and 4.5%. Today, they’re closer to 6.5% to 7%.
Here’s how that shift plays out in real terms:
- In 2019, a $400,000 home with 20% down at a 4% rate would mean a monthly mortgage payment of around $1,500.
- In 2025, that same home at a 6.75% rate costs about $2,100 per month. That’s a $600 increase just in interest and principal.
According to the U.S. Department of Housing and Urban Development, housing costs are typically considered affordable only if they stay below 30% of a household’s monthly income, those higher payments quickly push buyers past the threshold.
Another major challenge is that real household income has barely improved. U.S. Census data shows that inflation-adjusted median income stood at roughly $83,730 in 2024, essentially the same as in 2019. This isn’t enough to offset the $600 jump caused by interest rates. And that’s before considering home prices themselves.
Home prices have surged nearly 38% since 2019, rising from $319,450 to $439,450. Put together, higher prices, steeper mortgage costs and slower income growth have left many households locked out of the market.
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Some markets have been hit harder than others
The report shows affordability has eroded in nearly every corner of the country, but some metros have been hit particularly hard. Buying power fell the most in Milwaukee, Houston, Baltimore, New York City, and Kansas City, where wages have lagged well behind housing costs.
Not every market is struggling. Realtor.com found six areas where stronger-than-average wage growth actually improved affordability. Those included:
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- Cleveland, OH
- Phoenix, Mesa and Chandler, AZ
- Richmond, VA
- Indianapolis and surrounding metros in Indiana
- Tampa, St. Petersburg and Clearwater, FL
- Austin and surrounding areas in Texas
How to manage today’s housing market
With prices and rates stacked against buyers, what can Americans do?
1. Calculate your personal buying power
Keep housing costs below 30% of your income, and remember that your total debt (including mortgage, car loans, and credit cards) shouldn’t exceed about 36% of your income [2]. Tools like Fannie Mae's mortgage affordability calculator can help.
Don't forget you also have to factor in other debt too, as your total debts including your house and other loan payments should not exceed around 36% of your income.
2. Adjust your search
After determining your buying power, you can look at what homes are available in your area to see if there are any in your price range. If you cannot find a house that will keep payments below 30% of your income, you may need to:
- Expand your search area outward to find more affordable prices
- Consider a smaller home that is more within your budget
- Search for homes with an assumable mortgage that could offer lower payments
- Consider unconventional ideas like buying a multi-generation household with family
The housing market has become more difficult than ever, with buying power falling sharply in just a few years. But while affordability challenges are widespread, understanding what drives them and carefully evaluating your own budget can help you make smarter decisions. In a market this tough, being equipped with the right knowledge is the first step toward homeownership.
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[1]. Realtor.com. "Shrinking Budgets: How Higher Mortgage Rates Have Affected Buying Power"
[2]. Fannie Mae. "Selling Guide."
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
