Key Takeaways
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- Mortgage rates have eased to around 6.2%, but affordability remains near multi-decade lows.
- The median home now costs over 5× the median household income, far above the long-term norm of 4×.
- A household earning $75,000 can afford just 21% of active listings, down from nearly 50% before the pandemic.
- Escrow costs (taxes + insurance) are up 45% since 2019, often surpassing the cost of principal and interest.
- Regional divides are widening: New York home prices have doubled in nine years, while Texas prices rose 33%.
- Owners with low-rate mortgages aren’t selling, keeping inventory tight and prices high.
Mortgage Relief Isn’t Enough
Mortgage rates have eased from their 2024 highs, hovering near 6.2%, yet many Americans still find homeownership out of reach.
A combination of soaring prices, tight supply, and rising non-mortgage costs—insurance, property taxes, and escrow—continues to erode affordability.
“Many potential buyers are really maxed out on cost,” said Daniel McCue of Harvard’s Joint Center for Housing Studies. “Lower interest rates can only get them so far.”
Prices Still Outpacing Incomes
The median home now costs over five times the median household income—well above the historical average of about four times, said Andy Walden of Intercontinental Exchange.
Home prices surged during the pandemic as low rates and demand for more space fueled a buying frenzy.
While price growth has cooled, incomes haven’t caught up enough to restore balance.
Fewer Listings Within Reach
The National Association of Realtors reports that a household earning $75,000 can afford just 21% of active listings—less than half the share available in 2019.
High-income buyers, by contrast, continue to dominate, often paying in cash or large down payments.
“It’s a clear example of the ‘K-shaped’ economy,” said NAR’s Nadia Evangelou. “Some households are still moving forward while others wait on the sidelines.”
Regional Divide Deepens
Inventory and affordability vary sharply by region.
- Northeast and Midwest: Entry-level homes remain scarce and competitive, pushing rapid price appreciation.
- New York: Prices have more than doubled in nine years amid chronic supply shortages.
- Texas: Prices rose about 33%, cushioned by stronger construction activity.
Escrow Costs Surge
Even when buyers find homes, monthly costs keep climbing.
Escrow payments—which cover property taxes and insurance—have risen 45% nationally since 2019, according to Cotality economist Archana Pradhan.
In some states, including Nebraska, escrow now represents up to 45% of total monthly payments, sometimes exceeding principal and interest.
The Broader Problem
Homeowners with low locked-in mortgage rates and high equity are staying put, further constraining supply.
Rising insurance premiums, particularly in climate-prone states, and elevated local taxes add another layer of pressure.
The result: a two-speed housing market where affordability relief from lower rates is offset by structural cost inflation.
Bottom Line:
Mortgage rates may have fallen, but the fundamental math of homeownership hasn’t changed.
Until housing supply expands and insurance and tax costs stabilize, lower borrowing costs alone won’t make homes broadly affordable.
