Housing Affordability ‘Considerably Worse’ Than Five Year...

By Hugh Cameron

U.S. News Reporter

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Stubborn house prices and elevated mortgage rates continued to weigh on prospective homebuyers in the third quarter of 2025.

According to a recent report from Oxford Economics, despite some moderation in recent quarters, housing affordability in the U.S. remains "considerably worse than five years ago." The researchers found that the median household income needed to afford a single-family home now stands at $110,100, down 2.3 percent from its peak in the first quarter, but almost double the $58,400 required in same quarter of 2020.

Why It Matters

Chronic supply shortages and homeowners "locking in" during the low-mortgage pandemic era, among several other factors, have contributed to high house prices in recent years, an element of the wider affordability issues—to some a crisis—sweeping the U.S. in 2025.

This mix of high prices and wider fiscal pressures has dampened buyer demand, leading to difficulty for sellers, many of whom are now pulling their listings out of frustration or an inability to meet tighter buyer budgets.

What To Know

According to Oxford Economics, 38 percent of U.S. households have the necessary income to afford a home, down from 57 percent in the third quarter of 2020 and in-keeping with the 36 percent increase in median prices to $417,100 over this period.

The report found that the least affordable metros were those where the cost of living already exceeded the national average, led by San Jose, San Francisco, Honolulu, Los Angeles and San Diego. Across these areas, a maximum of 17 percent of households earned enough to afford their respective housing costs in the third quarter, compared to between one-fifth and one-third five years ago.

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These challenges were highlighted in a recent report from the National Association of Realtors, which found that the share of first-time buyers had fallen to a historic low of 21 percent, while the average age of first-time buyers had risen to a record high of 40 years old.

However, beyond higher house prices, Oxford Economics said mortgage rates were proving a more significant factor in the housing affordability crisis.

"Mortgage rates have had a disproportionately greater impact on the decline in affordability than the increase in house prices in most cases," researchers wrote. "Not only have higher mortgage rates nearly doubled monthly housing costs, but because of mortgage payment schedules, interest costs have also crowded out principal payments more so in the early years of a mortgage."

Goldman Sachs, in a recent study, similarly attributed the growing divergence between prices and incomes to mortgage rates, noting that the average monthly mortgage payment as a share of income had risen from under 20 percent before the pandemic to a "historically high ratio of over 30 percent since 2022."

The bank blamed this on a "prolonged slowdown in U.S. housing supply," fueled in part by "restrictive land use regulations."

Addressing a national shortfall of about 1.5 million homes is central to easing costs for homebuyers, according to the National Association of Home Builders, which early this year published an updated 10-point blueprint to address the U.S.'s "housing affordability crisis." Among its recommendations were eliminating "excessive regulations," undoing "inefficient local zoning rules" and boosting production of critical materials to ease building costs.

What People Are Saying

Goldman Sachs researchers wrote in a recent report: "A sharp and prolonged slowdown in the growth of housing supply following the 2007-09 Great Recession has weighed on affordability. The share of total housing stock available for sale or rental is now below its historical average, which implies a gap between supply and demand."

Redfin senior economist Asad Khan wrote in a recent report: "Many homeowners who bought during the pandemic demand frenzy still expect sky-high prices. They remember a seller's market, so they're hesitant to yield to buyers who want to negotiate the price down and/or ask for concessions."

What Happens Next

According to Oxford Economics, mortgage rates are expected to fall to 6.0 percent by 2028, easing some of the affordability pressures currently placed on buyers, though it forecasts that "house price growth will also decelerate but largely remain positive."

The report continued, "However, property taxes and especially insurance costs will continue to increase over the next few years, offsetting the lower mortgage rates somewhat."

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