Home Affordability Is Improving for the First Time in Five Years. Here's the Data.
For the better part of five years, buying a home has felt increasingly out of reach for a growing number of Americans. Prices surged. Rates doubled. Monthly payments climbed to levels that priced out entire income brackets.
But something has quietly shifted. After nearly five straight years of worsening conditions, the cost of buying a home is finally coming down.
The Numbers Tell the Story
According to a February 2026 report from Redfin, Americans now need to earn $111,252 per year to afford the typical U.S. home, down 4% from $115,870 a year ago. The income needed to buy a home peaked at over $122,000 in June 2025 and has been declining since November.
That is a meaningful shift, and it did not come from one single factor. It came from three working together.
Mortgage rates have fallen from their 7%-plus highs to around 6.1%. Home price appreciation has slowed dramatically, with the median home sale price at $426,747, just slightly higher than last year, compared to double-digit gains during the pandemic boom. And wages have been growing at roughly 4% per year, gradually closing the gap between what people earn and what homes cost.
The result is that the typical monthly mortgage payment on a median-priced home has dropped to around $2,675, down from roughly $2,800 a year ago. That is a meaningful reduction, though it still represents a stretch for many households. The typical American household earns about $86,185, roughly $25,000 less than what is needed to comfortably afford the median-priced home. Homeownership remains out of reach for many, but the trajectory is finally moving in the right direction.
What This Feels Like in Practice
The statistics matter, but what really matters is how this shows up in your daily life as a buyer.
It means the home you were priced out of last year might now fit your budget. It means your monthly payment on a $350,000 home is hundreds of dollars lower than it would have been 18 months ago. It means you may qualify for a larger loan than you expected, giving you more flexibility in your search.
For first-time buyers especially, this is significant. The barrier to entry has been the single biggest complaint from younger buyers for years. While homeownership is still not cheap, the trend line is finally moving in the right direction.
Is This a Trend or a Blip?
Redfin economists expect affordability to continue gradually improving throughout 2026 as wages continue rising while housing costs stay mostly stagnant. The combination of moderating prices, steady wage growth, and stable-to-declining rates creates a foundation that did not exist even a year ago.
That said, affordability varies enormously by location. Homebuying affordability is improving in 37 of the 50 most populous metro areas, with the biggest improvements in Dallas, Sacramento, and Jacksonville. Meanwhile, the typical household in coastal California metros earns roughly half the income needed to afford a home. Where you buy matters just as much as when you buy.
What You Should Do With This Information
If you have been watching the market from the sidelines, waiting for things to get better, they have. Not dramatically, and not everywhere, but the direction is clear. The window of improving affordability is open, and the smartest move is to find out exactly where you stand.
Want to see what you can afford at today's rates and prices? Reach out for a no-obligation conversation. We can run the numbers together and give you a clear picture of your options.