Despite a softening housing market, millions remain priced out
of ConsumerAffairsMay 6, 2025
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The rapid rise in home prices is playing an outsized role in home affordability, with one report finding a buyer needs an income of $114,000 a year to afford the typical home.
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Realtor.com reports a potential shift toward a more buyer-friendly market, with active listings up 30.6% year-over-year
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While some long-term homeowners can lower prices, recent buyers face limitations, and home prices remain out of reach for households earning under six figures.
Recent discussions of home affordability have mostly focused on how mortgage rates are burdening would-be buyers. However, mortgage rates of between 6% and 7% are not particularly high on a historical basis.
What is often overlooked is how the median price of U.S. homes has risen much faster than the rate of inflation since the beginning of the COVID-19 pandemic.
According to the National Association of Realtors, the median existing-home price for all housing types in the United States in January 2020 was $266,300. Five years later, NAR put the median home price at $396,900, a nearly 50% increase.
Because of the combination of rapidly-rising home prices and normalizing mortgage rates, the annual income needed to afford a median-priced home in the U.S. has skyrocketed to $114,000, an increase of over 70% from just six years ago.
This figure, revealed in Realtor.com’s April 2025 Housing Trends Report, shows the mounting challenges facing would-be homebuyers amid persistently high home prices and mortgage rates that have risen from around 3% during the pandemic to a normal range.
The required income is based on a 30-year fixed-rate mortgage with a 20% down payment, ensuring housing costs do not exceed 30% of gross monthly income. In 2019, a household could afford a typical home with a $67,000 income, a difference that highlights how unaffordability has escalated even faster than inflation or wage growth.
Is the tide turning?
Despite the steep income requirements, the latest market data suggests the housing landscape may be softening slightly in favor of buyers. Realtor.com Chief Economist Danielle Hale pointed to three key developments: growing inventory, increasing price flexibility among sellers, and a moderating pace of market activity.
Even with todays affordability hurdles, meaningful changes in the market could give buyers a better shot at finding a home, Hale said in a statement. Sellers are becoming more flexible on pricing, and while higher mortgage rates are certainly weighing on demand, the silver lining is that the market is starting to rebalance.
In April, active listings were up 30.6% compared to the previous year, and 18% of active listings saw price reductions, up 2.5 percentage points year-over-year. The median list price for single-family homes ticked up to $431,250, a modest 0.3% increase year-over-year, while new listings rose 9.2% from April 2024.
However, home prices remain a barrier to buyers without a six-figure annual income. While some sellers especially those who bought five or more years ago may be more flexible on price, those who bought in the last four years cant cut their price much without taking a loss.
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