Housing affordability challenges steepen in Q3

The housing market showed faint signs of near-term affordability improvement in late 2025, but it remains dramatically worse than it was before the COVID-19 pandemic, according to new research from Oxford Economics.

In the third quarter, a household needed to earn $110,100 a year to afford to own a single-family home, including taxes and insurance. That was about 2.3% lower than the peak in early 2025 but nearly double the income required five years earlier.

Only 38% of American households earned enough to meet that threshold, far below the 57% who could buy in 2020.

The nation’s least affordable large metro areas were San Jose, San Francisco, Honolulu, Los Angeles and San Diego, where, at most, 17% of households could afford typical housing costs.

Five years ago, one-fifth to one-third of households in these areas had the income to buy, according to the report.

Affordability worsened most sharply in a mix of Sun Belt and Midwest metros, including Port St. Lucie and Ocala, Florida; Kansas City; and Fond du Lac and Green Bay, Wisconsin.

Places such as San Francisco and San Jose saw smaller drops simply because they were already among the nation’s most expensive markets and experienced less severe price escalation, the report explained.

By contrast, the most affordable large metros remain concentrated in the Midwest and the Sun Belt.

Pittsburgh; Cleveland; Oklahoma City; Louisville, Kentucky; and Memphis, Tennessee, each had close to half of households that were able to afford median housing costs.

Erie, Pennsylvania; Toledo and Canton, Ohio; Wichita Falls, Texas; and Florence, South Carolina, were the most affordable overall — with more than half of households able to buy a median-priced home.

Oxford Economics also noted that elevated mortgage rates remain the biggest affordability obstacle, as interest costs overwhelm principal repayments in the early years of a mortgage.

Insurance premiums are also rising rapidly in states such as Florida, North Carolina and South Dakota, further squeezing buyers.

Most homes out of reach for median earners

While Oxford Economics highlighted income thresholds and geographic divides, a separate Bankrate analysis painted a more immediate picture of what buyers face in the open market.

Bankrate found that buyers earning the median U.S. income — roughly $80,000 — are priced out of three-quarters of all homes for sale nationwide.

The annual income needed to afford the median-priced U.S. home, now $435,000, is nearly $113,000. That gap climbs even higher in coastal metros such as Seattle, San Francisco and New York, where buyers often need more than $200,000 in yearly income.

For would-be buyers like Charlotte loan officer Julia Sheers, the realities hit quickly.

“If you told me a year or two ago that I’d be spending half a million dollars on a house, I would’ve thought you were crazy,” she told Bankrate. “But now it’s like, ‘Oh, that’s not bad. That’s a good price.’ Everything is definitely really expensive.”

Bankrate’s evaluation of Realtor.com listings shows that in Miami, Los Angeles and San Diego, fewer than one in 50 active listings are affordable to the typical household.

Meanwhile, Rust Belt and Southern metros like Pittsburgh; St. Louis; Detroit; Cincinnati and Birmingham, Alabama, still offer comparatively better odds — with up 50% of listings within reach.

Hannah Jones, senior economic research analyst at Realtor.com, said affordability trouble reaches crisis level when most homes are unattainable for typical earners.

“When you see that the typical household can only afford 30% or 20% of the homes on the market, that’s when the market is not calibrated well to the income levels of locals,” she said.

Experts caution that meaningful relief won’t come quickly.

“It will be like slowly easing out of this affordability situation versus anything that’s going to just flip the switch,” Jones said.