In the face of soaring home prices and stubbornly high mortgage rates, American households would need a substantial income boost of nearly $50,000 to make median-priced homes as affordable as they were in 2019, according to a new analysis from Realtor.com. The report, released this week, highlights how the share of median household income required for a typical mortgage payment has climbed from about 21% in 2019 to more than 30% today, driven by home values that have surged alongside interest rates that have nearly doubled since January 2022.
Realtor.com, a leading real estate listings platform, outlined two primary paths to restore affordability to pre-pandemic levels: either a dramatic 28% drop in home prices or an increase in median household income by around $49,000 annually. Neither scenario seems plausible in the short term, the analysis concludes, given historical trends and current market dynamics. Real median household income has grown only about 17% over the past two decades, per U.S. Census Bureau data, while mortgage rates are projected to remain elevated, hovering near 6% for 30-year fixed loans through 2026 according to most forecasts.
"The U.S. housing market continues to grapple with a persistent mismatch between housing supply and buyer demand," said Hannah Jones, senior economic research analyst at Realtor.com, in an interview with CNBC Make It. "If buyer demand strengthens without a corresponding increase in supply, renewed price growth is likely." Jones's comments underscore the ongoing tension in the market, where lower rates could spur more buyers but exacerbate price pressures without additional homes.
The National Association of Realtors (NAR) echoes this concern, projecting that home prices will rise about 4% in 2026 as demand rebounds against limited inventory. This forecast aligns with Realtor.com's view that even modest rate declines won't deliver meaningful affordability improvements without addressing the root issue: a nationwide shortage of nearly 4 million homes. That gap, estimated by Realtor.com, has kept supply tight and prices elevated, particularly in high-demand areas.
Experts argue that boosting demand through cheaper financing alone won't resolve the crisis. "You don't really solve an affordability crisis by subsidizing demand through artificially cheap financing," said Jake Krimmel, senior economist at Realtor.com. "For costs to go down, the supply of homes has to better meet demand," he added, emphasizing the need for more construction to balance the equation.
Supply constraints stem from a variety of factors, including restrictive zoning laws and protracted permitting processes that hinder new development. A 2025 Realtor.com report detailed how these barriers limit where and how much housing can be built, contributing to the persistent shortfall. At the federal level, bipartisan legislative efforts have emerged to tackle these bottlenecks, with proposals targeting zoning reforms, faster permitting, and incentives for construction. However, most of these initiatives remain in preliminary stages, facing hurdles in a divided Congress.
Progress is more tangible at the state level, where some regions are experimenting with deregulation. In Texas, lawmakers passed measures last year to ease zoning restrictions and streamline approvals for multifamily housing projects, aiming to accelerate building in fast-growing metro areas like Austin and Dallas. California, despite its own supply challenges, enacted similar laws in 2024 to loosen single-family zoning in urban zones, allowing for more density in cities such as Los Angeles and San Francisco. Yet, the impacts have been uneven; while Texas has seen a modest uptick in permits, California's efforts have yielded mixed results amid local resistance and high construction costs.
The timeline for closing the housing gap varies dramatically by region, according to the 2025 Realtor.com report. In the South, where construction has ramped up in response to population influxes, the shortfall could be addressed in as little as three years at current rates of building and household formation. The West, including states like Colorado and Arizona, might take six and a half years, hampered by environmental regulations and land scarcity.
Challenges are more acute elsewhere. The Midwest, with slower population growth and aging infrastructure, faces a projected four-decade wait to balance supply and demand. In the Northeast, the gap is unlikely to close under existing trends, as stringent local ordinances and high land costs stifle development in places like Boston and New York City. These regional disparities highlight how national policies may fall short without tailored local solutions.
The affordability squeeze is hitting would-be buyers hard, particularly younger households and first-time purchasers who entered the market during the low-rate era of the 2010s. Back in 2019, a median-priced home—around $280,000 at the time—required monthly payments that aligned with about one-fifth of typical earnings. Today, with median prices exceeding $400,000 and rates at 6.8%, that burden has intensified, pushing homeownership out of reach for many and fueling a surge in renting.
Broadening the context, the housing crisis intersects with larger economic pressures. Inflation, which peaked in 2022, contributed to the Federal Reserve's aggressive rate hikes, which in turn locked in higher borrowing costs. While inflation has cooled to around 2.5% as of early 2026, the Fed's cautious approach to cuts means relief for borrowers remains gradual. Economists note that wage growth, averaging 3-4% annually in recent years, hasn't kept pace with housing costs, widening the affordability chasm.
Stakeholders across the spectrum agree on the need for supply-side interventions, though approaches differ. NAR advocates for federal incentives like tax credits for builders in underserved areas, while progressive groups push for inclusionary zoning to ensure affordable units in new developments. Conservative policymakers, meanwhile, favor deregulation to unleash private investment, as seen in Texas's model. Realtor.com's Krimmel cautioned that without coordinated action, the market risks further entrenchment of inequality, with wealthier buyers dominating amid limited options.
Looking ahead, the path to recovery depends on multiple fronts. If mortgage rates dip below 6% as some analysts predict by late 2026, it could ignite buying activity, but only if inventory expands. Policymakers at all levels are under pressure to act, with upcoming congressional sessions potentially advancing stalled bills. For now, aspiring homeowners are advised to explore alternatives like down payment assistance programs or markets in the South, where affordability edges higher.
In summary, the Realtor.com analysis paints a sobering picture of a housing market far from equilibrium, where income gains or price corrections alone won't suffice. As Jones put it, the key lies in bridging supply and demand—a goal that demands innovation, policy shifts, and time. Until then, the dream of homeownership remains deferred for millions, a stark reminder of the enduring challenges in America's real estate landscape.