Housing Affordability Shows Slight Improvement but Remains Challenging
New research from Oxford Economics reveals that while housing affordability in the United States showed faint signs of improvement in the third quarter of 2025, the overall situation remains significantly worse than it was before the COVID-19 pandemic. Households now require substantially higher incomes to afford single-family homes, and the share of Americans able to buy has decreased markedly.
In Q3 2025, a household needed an annual income of approximately $110,100 to cover the costs of owning a median-priced single-family home, including taxes and insurance. Although this figure represents a 2.3% decline from the peak earlier in the year, it is nearly double the income required five years ago. Currently, only 38% of American households meet this income threshold, compared to 57% in 2020.
Geographic Disparities in Housing Affordability
The report highlights significant geographic disparities in housing affordability across the country. The least affordable large metropolitan areas remain concentrated on the West Coast and in Hawaii, with San Jose, San Francisco, Honolulu, Los Angeles, and San Diego topping the list. In these markets, fewer than 17% of households can afford typical housing costs.
Five years ago, between 20% and 33% of households in these cities had sufficient income to buy a home, indicating a steep decline in affordability. Meanwhile, affordability has worsened most sharply in several Sun Belt and Midwest metros, including Port St. Lucie and Ocala in Florida, Kansas City, and Fond du Lac and Green Bay in Wisconsin.
Markets like San Francisco and San Jose experienced smaller affordability drops because they were already among the most expensive, with less severe price increases in recent years.
More Affordable Markets Concentrated in Midwest and Sun Belt
Conversely, the most affordable large metros are primarily located in the Midwest and Sun Belt regions. Cities such as Pittsburgh, Cleveland, Oklahoma City, Louisville, and Memphis have roughly half of their households able to afford median housing costs.
On a broader scale, smaller metros like Erie, Pennsylvania; Toledo and Canton, Ohio; Wichita Falls, Texas; and Florence, South Carolina, rank as the most affordable overall, with over 50% of households able to purchase a median-priced home.
Mortgage Rates and Rising Insurance Costs Exacerbate Challenges
Oxford Economics identifies elevated mortgage rates as the primary obstacle to affordability. Interest costs in the early years of a mortgage often exceed principal repayments, increasing monthly payments for buyers. Additionally, rising insurance premiums in states such as Florida, North Carolina, and South Dakota further strain potential homeowners’ budgets.
Median Income Buyers Face Widespread Market Exclusion
A separate analysis by Bankrate underscores the immediate challenges facing median-income buyers. With a typical U.S. household income around $80,000, three-quarters of homes on the market are out of reach. The median-priced home nationwide is now approximately $435,000, requiring an annual income near $113,000 to afford.
This affordability gap is even more pronounced in coastal metros like Seattle, San Francisco, and New York, where buyers often need incomes exceeding $200,000 annually.
For prospective buyers such as Charlotte loan officer Julia Sheers, these realities are stark. She remarked, “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. But now it’s like, ‘Oh, that’s not bad. That’s a good price.’ Everything is definitely really expensive.”
Market Variations Highlighted by Realtor.com Data
Bankrate’s evaluation of Realtor.com listings shows that affordability varies widely by metro area. In Miami, Los Angeles, and San Diego, fewer than 2% of active listings are affordable to the typical household. In contrast, Rust Belt and Southern metros such as Pittsburgh, St. Louis, Detroit, Cincinnati, and Birmingham offer better opportunities, with up to 50% of listings within reach for median-income buyers.
Hannah Jones, senior economic research analyst at Realtor.com, emphasized the severity of the affordability crisis. She noted, “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.”
Outlook: Gradual Improvement Expected, Not a Quick Fix
Experts caution that any meaningful relief in housing affordability will be gradual. Jones explained, “It will be like slowly easing out of this affordability situation versus anything that’s going to just flip the switch.”
As mortgage rates remain elevated and housing prices continue to outpace income growth in many areas, prospective buyers, sellers, and investors will need to navigate a challenging market landscape for the foreseeable future.
Source: https://www.housingwire.com/articles/housing-affordability-challenges-steepen-in-q3/
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