Only 28% of Homes Are Affordable for Average American Households Amid Rising Costs

Declining Home Affordability: A Growing Crisis

In a recent report from Realtor.com®, alarming statistics regarding home affordability have come to light. As of August 2025, only 28% of homes available on the market fall within financial reach of typical American households. This statistic draws attention to a critical situation influenced by rising interest rates and persistent affordability challenges that have left many buyers struggling to adjust.

A Dramatic Shift in Buyer’s Budgets

The report shows that the maximum affordable home price for a median-income household in the U.S. has dropped to $298,000, a decline of nearly $30,000 since 2019, when it stood at $325,000. Despite a notable increase in median income of 15.7% during this period, buyers are still feeling the strain.

Chief Economist Danielle Hale emphasizes this point: "Even as incomes grow, higher interest rates have eroded the real-world purchasing power of the typical American household." This erosion affects buying patterns and expectations, forcing prospective homeowners to consider downsizing, moving to less desirable areas, or postponing their homeownership plans entirely.

The Impact of Rising Mortgage Rates

As mortgage rates hover near 6.75%, the implications for homebuyers are significant. On a $320,000 fixed-rate loan, buyers now face monthly payments that are an astonishing $600 higher than what they would have paid under the average mortgage rate from just a few years ago. This translates to an increased financial burden of around $7,200 annually.

To put this into perspective: in 2019, a $320,000 loan covered the entire median home price across the country, while today it necessitates a nearly 28% down payment to secure ownership at the current listing price of $439,450.

Regional Disparities in Buying Power

The report also highlights a stark contrast among various metro areas regarding diminishing buying power. Cities such as Milwaukee, Houston, Baltimore, New York City, and Kansas City experience an alarming decline of 9-10.5% in home affordability for the median earner. For instance, Milwaukee reported the most drastic decrease with maximum affordable home prices plummeting from $314,000 to $281,000.

In contrast, some metros are seeing slight improvements. Cleveland, Ohio, has made strides in boosting buying power due to strong wage growth, managing to increase the affordable price from $249,000 to $260,000—an increase of 4.4%. Surprisingly, 50% of the available homes in Cleveland remained affordable for the average family.

Pandemic-boom cities like Phoenix, Tampa, and Austin have also noticed modest boosts in buying power, although soaring home prices mean very few affordable options remain.

Analyzing the Effects on Buyer Behavior

This decline in affordability is pushing many potential buyers to alter their expectations significantly. Increased competition for lower-priced homes is forcing buyers to pivot toward rental markets or indefinitely delay their aspiration of homeownership.

These dynamics understandably complicate decisions for sellers as well, who may need to rethink their pricing strategies given the evolving market conditions. Without improvements in mortgage rates, wage growth, or increased housing supply, particularly in affordable categories, potential homebuyers will continue to face challenges moving forward.

Conclusion: Future Outlook

Overall, the grim outlook on housing affordability serves as a wake-up call regarding a deepening housing crisis. Realizing lost buying power is essential, and addressing the intersection of rising mortgage costs, stagnant incomes, and the urgent need for more affordable housing supply remains pivotal. For aspiring homeowners, navigating this complex scenario requires strategic thinking and flexibility—the keys to unlocking potential in an increasingly challenging real estate landscape.