UHERO Insights

America’s housing affordability challenge: How big and how broad?

July 2, 2026

Byron Gangnes Housing Insights

INSIGHTS ARE PRELIMINARY MATERIALS CIRCULATED TO STIMULATE DISCUSSION AND CRITICAL COMMENT. THE VIEWS EXPRESSED ARE THOSE OF THE INDIVIDUAL AUTHORS. WHILE INSIGHTS BENEFIT FROM ACTIVE UHERO DISCUSSION, THEY HAVE NOT UNDERGONE FORMAL ACADEMIC PEER REVIEW.

By Byron Gangnes

@misc{Gangnes_2026, title={America’s housing affordability challenge: How big and how broad?}, url={https://uhero.hawaii.edu/americas-housing-affordability-challenge-how-big-and-how-broad/}, abstractNote={We’ve heard lots about the unaffordability of housing. How widespread is it and how extreme?}, author={Gangnes, Byron}, year={2026}, month=july, language={en-US} }

We’ve heard lots about the unaffordability of housing. How widespread is it and how extreme?

To assess this, we need to do more than some of the simple illustrations out there, like those that compare the ratio of home price to income over time. Affordability also depends on other factors, including the size of down payments, prevailing interest rates, property taxes, and home insurance rates.

What is an “affordable” home price?

In this article I compare the median home resale price to a measure of the “affordable” price for the US overall and select metro areas. Here, the affordable price measure has a very specific meaning: it is the highest price that a median-income household in a specific locale can afford to pay if they:

• Make a 20% down payment
• Finance the balance with a conventional fixed-rate thirty-year mortgage at prevailing interest rates
• Pay closing costs up front and property taxes and home insurance monthly
• Housing outlays including principle, interest, property taxes, and insurance total no more than 30% of their income.

The closing costs, property taxes, and insurance are estimated for each specific locale. (I assume closing costs are paid upfront as required for most mortgages. If they can roll them into the mortgage—as is permitted in part for some federally insured programs—this would reduce cash due at closing but slightly reduce the mortgage that they can afford.) Any potential buyer’s share of agent commissions is not included because of widespread variability in how this is being handled in the wake of the 2024 National Association of REALTORS antitrust settlement.

This definition may or may not align with other measures of affordability. You may consider that a monthly payment that exhausts 30% of income is too high a burden on household finances. Or you may be more concerned about households with incomes below the median (more on these below), or who would struggle to put 20% down plus closing costs. On the other hand, a higher debt burden may be permitted, although this increases the monthly payment. Still, I consider this analysis to at least get at changes that have occurred over time and differences across markets.

The median prices used in this analysis are the Zillow ZHVI All Homes Middle Tier (35th-65th percentile, smoothed, seasonally adjusted) series. This includes both single-family homes and condominiums. See the appendix for more information about data sources.

Affordability trends

The figures below show what affordability looks like for the US overall. Housing affordability was relatively good throughout the 2010s, but it deteriorated significantly beginning in 2021, as home prices and then mortgage rates rose significantly. For the country overall, median home prices exceeded my definition of the affordable price by nearly 20% in 2021, as shown in the second chart. That peak was a bit larger than that experienced during the mid-2000s US housing boom.  The modern all-time worst situation was in the early nineteen-eighties, when mortgage rates exceeded 18% toward the end of 1981 and the national median price was more than 60% above the affordable price.

Affordability has improved somewhat over the past two years, as home price appreciation has slowed (prices have fallen slightly in some markets), and the affordable price has risen from a combination of income growth and mortgage rate decline. 

US Median Home Price and Affordable Price

US Median Home Price as a Percent of Affordable Price

Looking at US averages has its limits, since real estate is a local market, and experiences have differed significantly across various markets. I consider circumstances in several major metropolitan areas chosen somewhat arbitrarily to illustrate how different the situation and trends have been across different types of markets. Note that some of these metro statistical areas include lower-cost areas that are outside the primary city; for example, the Seattle MSA includes pricey Seattle and Bellevue, but also lower cost Tacoma.

The never-affordable markets

First there are the markets that are always unaffordable for many households. An example is my long-time home town of Honolulu. But even here, notice that affordability has risen and fallen over time with changes in home prices, interest rates, and income growth. In 2024, affordability fell to its lowest level in at least a quarter century, with the median price roughly double the affordable price. That exceeded by a small margin unaffordability during the mid-2000s national housing price bubble. But as in much of the rest of the country, affordability was considerably better—if still out of reach of the median income household—during the 2010s after the bursting of the housing bubble and the lingering effects of the global financial crisis.

Honolulu Median Home Price and Affordable Price

Honolulu Median Home Price as a Percent of Affordable Price

Another market that looks similar is Los Angeles, and to some extent the New York MSA, although affordability has not been quite as bad there, because this includes areas of New Jersey and Downstate New York. This points to an important limitation of assessing affordability for major metro areas, since there is a potentially vast range of home prices and incomes across areas and neighborhoods. So, for example, not all areas of LA would be considered unaffordable by my measure. Note also that we are using an overall measure of home prices that includes both single-family homes and condominiums. Presumably the latter would pass the affordability test in many more markets.

Markets similar to the national average

The second group of metro areas are ones which, like the US overall, saw affordability problems during the 2000s bubble but then experienced a long period of relatively good affordability until the pandemic. An example is Phoenix:

Phoenix Median Home Price and Affordable Price

Phoenix Median Home Price as a Percent of Affordable Price

In Phoenix, the median home price soared 66% between 2019 and 2022, accounting for a large part of the affordability deterioration.

Markets that are newly unaffordable

What is exceptional about the current affordability challenge is that even markets that had formerly been consistently cheap have recently become much less affordable. Charlotte is a prime example:

Charlotte Median Home Price and Affordable Price

Charlotte Median Home Price as a Percent of Affordable Price

These tend to be interior US cities that did not participate in the national home price bubble of the 2000s but have seen a dramatic decline in affordability since the pandemic. Other cities in this group include Atlanta and Dallas. The latter has never been truly cheap (median price has tended to track affordable) but by 2022 the metro area had a median price that exceeded the affordable price by more than 60%.

The driver in these cases is particularly rapid appreciation of home prices relative to income gains. In the case of Atlanta, median home prices rose roughly three times more (56%) than median income (19%) between 2019 and 2023. A similar relative home price jump occurred in Charlotte. There is suggestive evidence that this is due largely to a decline in the rate of housing production in these markets. (See, for example, Glaeser and Gyourko, 2025.)

Here is what price appreciation after 2020 did to Charlotte median price monthly payments. Good affordability until 2018, but a median price just above the affordable price by 2024. Payments in some markets are much higher now than the corresponding affordable price.

A summary of home price affordability

The following charts summarize affordability and its deterioration since 2020 across the select major metro areas I have worked with for this analysis. You can see the difference between the pricier and still more-moderately priced markets and then how affordability has eroded in recent years.

Median Home Market Price and Affordable Price, 2025

Median Home Price as Percentage of Affordable Price

Affordability at other income levels

These evaluations of affordability for median income households of course ignore the fact that half of all households earn less than the median income and half more. Part of the concern about affordability regards those households that earn less than the median. In the chart below, I show for the Seattle metro area affordable prices for 80% and 120% of the median income. (80% of the median income is roughly the 40^th percentile of the income distribution and 120% approximately the 60^th percentile.) Note that for this pricey market, homes have been out of reach for the bottom 40% of all households for all but about a five-year period in the mid-2010s. The median price today is roughly twice as high as they could afford. Of course, the situation may be better for the condo market, which I do not analyze separately here.

Seattle Median Home Price Compared with Affordable Price, Various Income Levels

The affordability challenge has likely peaked for now

Housing affordability is now a challenge in many major markets, even in cities that in the past have boasted relatively good affordability. Both higher home prices and higher interest rates have played a role in the deterioration of recent years.

But what often gets lost in the current discussion is the fact that affordability has improved—in some cases significantly—over the past two years. This reflects both the moderate decline in mortgage interest rates AND the growth of incomes. In some cases, home prices have also fallen modestly over the past two years. Note that the recent pickup in mortgage rates returns them to about the 2025 average, so that factor has not changed much since then.

This is an important result that is often ignored in the discussion of housing affordability: that even without extraordinary measures, affordability will improve over time as incomes grow and (hopefully) mortgage rates recede even modestly. It is possible for a population to “grow into” a pricier home environment as their means expand.

That is not to say that public policies to address affordability are not needed. Many households of moderate income—but below the median—face almost impossible home buying challenges in some markets. While detailed policy analysis is beyond the scope of this article, it is important to note that measures will be needed on both the supply and demand sides of the market. Efforts to streamline permitting for new homes, to increase tax incentives to finance affordable home development, and to support the building of smaller units have either been adopted or are under discussion at the federal, state, and local levels. Far less has been done on the demand side, primarily because of the high cost of subsidies to homebuyers. But efforts to reduce overall mortgage costs and to assist with down payments will likely be needed as part of a broader solution to the housing crunch.

Appendix: Housing Affordability Model — Parameter Sources
Sources for insurance rates, property tax rates, and closing costs for each metro area.