Housing prices would need to fall about 30% before basic affordability returns to most U.S. cities. Experts say mortgage rates must drop to around 4.4% for a typical home to fit within the affordability rule of 30% of median income.
https://fortune.com/2025/07/30/mortgage-rates-housing-affordability-zillow-report
Right now the average thirty year mortgage rate sits near 6.8%, despite being well below peak rates of the 1980s when mortgages topped 16%
https://fred.stlouisfed.org/series/MORTGAGE30US
Inflation adjusted home prices are up about 45% since 2020, while wages lag far behind, pushing affordability to historic lows
https://www.howeandrusling.com/2025-u-s-housing-market-update-affordability-crisis-regional-trends-what-comes-next/
People routinely paid well over 5% interest during the 1980s. Your parents may have endured 17% rates but they bought homes priced far lower relative to income. Today, with rates below 7% and prices 2x or 3x higher, buyers are worse off in real terms.
Homeownership now stretches household budgets to unsustainable levels. Even in high cost metros a zero percent mortgage rate would not bring prices into the 30% income threshold
https://www.investopedia.com/not-even-a-zero-interest-mortgage-rate-could-help-affordability-in-some-cities-11781243
The problem is not just rates or prices alone. It is the combination. Middle income households find mortgage payments exceeding 35% or more of income even if they qualify. Supply remains tight so builders cannot catch up. Unless prices fall or incomes rise substantially, affordability will remain out of reach.
"Zillow reported this week it would take mortgage rates dropping to about 4.43% to make an average home affordable for a typical buyer".
Long $TLT to save housing.
— Fibonacci Investing⚡️ (@FibonacciInves1) August 4, 2025
Oh boy here we go pic.twitter.com/uRHgLZDEp1
— Darth Powell (@VladTheInflator) August 3, 2025
But but .. home prices only go up 😭 https://t.co/p0XQOBqmDX
— tic toc (@TicTocTick) August 4, 2025