A median-income American household can now afford a $331,483 home, a $30,302 improvement since last year and the highest affordable price since March 2022. a new Zillow analysis shows.
According to the analysis, a median-income household has seen roughly 82,300 more homes come into its budget than a year ago. Lower mortgage rates and rising incomes have made the difference.
Zillow said it forecasts further dips in mortgage rates this year and that could lead to additional improvements in buying power.
Improving affordability points to a more active home shopping season this spring, Zillow noted.
The typical mortgage payment — excluding taxes and insurance, and assuming a 20% down payment — is 8.4% lower than a year ago, Zillow’s analysis stated.
According to the analysis, home value growth has flattened, and mortgage rates have fallen from an average of 6.96% in January 2025 to 6.10% last month. Incomes have edged higher, Zillow said.
Difference Between ‘Settling’ and ‘Choosing’
Together, Zillow noted that it gives a median-income household an extra $30,302 in buying power.
Zillow stated that affordability is still challenged — a median-income household would spend 32.3% of that income on a typical mortgage payment — but that additional $30,000 in buying power can mean the difference between settling and choosing for home buyers this year.
Buying power is at its highest level since March 2022, when mortgage rates were still below 5%, Zillow stated.
The recent low point was in October 2023 at $272,224. Mortgage rates averaged 7.62% that month, the highest average in any month since 2000. Zillow said it expects rates to fall more through 2026, which would unlock additional buying power for home shoppers.
Homebuyers see the biggest boost in expensive markets, Zillow noted.
In the San Jose metro area, a median-income household has gained nearly $74,000 in buying power compared to a year ago, the largest increase among major metro areas, the website noted. San Francisco buyers have seen a $56,115 boost, followed by Washington, D.C. ($48,881), San Diego ($46,506), and Boston ($46,390).
Zillow noted that in practical terms, a median-income household now can afford roughly 82,300 more homes for sale than a year ago. Along with improved affordability, that also reflects the continued inventory recovery, with 6% more homes on the market in January than a year earlier.
The nearly 447,000 homes a median-income household could afford today represent 40.3% of listings — up from 34.8% a year ago, Zillow noted.
Dollars Stretching Farther
In markets where home values have fallen, buyers’ dollars stretch even further in real terms with today’s lower mortgage rates, Zillow stated. For example, Houston leads the nation in affordable inventory growth, with just under 4,000 more listings within reach for a median-income buyer compared to a year ago.
Then, Phoenix follows with 3,434 additional affordable homes, ahead of Dallas (3,267), Miami (2,981), and Atlanta (2,279). Home values have fallen since last year in each of those markets, Zillow said.
Here’s what Zillow said this means for home buyers this year:
Improving affordability and rising inventory mean buyers should have more options within reach than in recent years. A $30,000 increase in buying power can open up a different neighborhood, a bigger home, or a home with fewer compromises.
With more prospective buyers able to afford a home, there will likely be more housing market activity in 2026. Zillow said it forecasts a 4% rise in existing home sales over 2025.
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