By one closely watched measure, buying a home in the United States has become marginally less punishing over the past year. Affordability indexes compiled by industry groups have ticked upward as wage growth has outpaced home price appreciation in several markets and mortgage rates have retreated from their multi-decade peaks. Yet for the millions of prospective buyers still on the sidelines, those statistical improvements feel almost entirely abstract.
A MarketWatch analysis published this week captures that dissonance precisely, noting that while headline affordability gauges point toward gradual relief, the lived reality for first-time and middle-income buyers bears little resemblance to what the data suggests. The article, headlined “Homes are getting more affordable. So how come you still can’t afford to buy one?”, lays out the structural forces that continue to price out a significant share of would-be owners even as the top-line numbers improve.
What the Affordability Indexes Are Actually Measuring
The National Association of Realtors’ Housing Affordability Index measures whether a median-income household earns enough to qualify for a mortgage on a median-priced home, assuming a 20 percent down payment and standard debt-to-income thresholds. When the index reads 100, a household earning the median income has exactly enough income to qualify. In recent months, the index has climbed modestly above that baseline in some regions, driven partly by home price growth slowing to the low single digits and average 30-year fixed mortgage rates pulling back from their October 2023 peak of roughly 8 percent toward the mid-to-upper 6 percent range.
That retreat in borrowing costs does translate into real savings on a monthly payment. A 50-basis-point decline on a $400,000 mortgage reduces the monthly principal and interest payment by approximately $120, a meaningful sum over the life of a loan. Wage growth has also played a supporting role, with average hourly earnings rising at an annual pace of around 3.9 percent in recent data, incrementally improving households’ qualifying power. On paper, the arithmetic looks better than it did 18 months ago.
Why the Math Still Fails Most Buyers
The problem is that affordability indexes mask several layers of friction that official measures do not capture. First, the 20 percent down payment assumption is itself a significant barrier. On the median U.S. home price, which remained above $400,000 through much of the first half of 2025, a 20 percent down payment represents more than $80,000 in upfront capital — a sum that takes the typical renter well over a decade to accumulate while simultaneously covering rent, which itself has risen sharply in most urban markets. Buyers who put down less than 20 percent face private mortgage insurance premiums that further erode their monthly budget.
Second, inventory remains structurally constrained. Homeowners who locked in mortgage rates below 3 percent during the pandemic refinancing boom have little financial incentive to sell and take on a new loan at nearly double that rate, a dynamic economists refer to as the lock-in effect. The resulting shortage of listings keeps competition intense and limits buyers’ negotiating leverage, sustaining prices even where demand has softened. In markets across the Sun Belt and Pacific Coast, active listings remain 30 to 40 percent below pre-pandemic norms, according to industry tracking data. The broad forces reshaping U.S. lending conditions are also evident in how major U.S. lenders have managed their mortgage books amid the rate cycle.
Third, the income distribution matters enormously. Median figures obscure the fact that housing cost burdens fall disproportionately on households in the bottom two income quintiles, where wage growth has been less consistent and savings rates remain thin. A household earning the true median income may technically qualify for a median-priced home under the index’s framework, but qualifying and comfortably sustaining a mortgage while managing childcare, healthcare, and transportation costs are not equivalent propositions. Broader economic pressures on household budgets, from energy prices to food inflation, compound the squeeze — a dynamic that also underlies the financial strain documented in reporting on how soaring prices erode household resilience even when aggregate indicators appear stable.
What Would Actually Move the Needle
Housing economists broadly agree that durable affordability improvement requires supply expansion rather than demand-side adjustments alone. More construction of entry-level and mid-market homes, reform of restrictive zoning codes in high-demand metropolitan areas, and faster permitting processes are consistently cited as the most effective levers. Some states have begun enacting legislation to loosen single-family zoning restrictions, though the pipeline from policy change to finished unit typically spans several years.
On the demand side, several federal and state down payment assistance programs have seen increased uptake, and some lenders have introduced products that allow qualifying buyers to put down as little as 3 percent without mortgage insurance under income-based criteria. These initiatives ease entry at the margins but do not address the fundamental mismatch between supply and the demographic wave of millennials — now the largest cohort of first-time buyers by volume — competing for a limited stock of starter homes. Until that structural imbalance narrows, affordability indexes may continue to inch higher while the experience of buying a first home remains, for many households, stubbornly out of reach.