Home Affordability Just Jumped 10 Percent—Here’s Why

With mortgage rates below 6 percent for the first time since 2022, Zillow forecasts robust market for median-income households

BY KEVIN HAYNES, NEWS WRITER

Falling mortgage rates and steady asking prices are making homes more affordable and sparking consumer confidence, according to Zillow, the Seattle-based real estate technology company.

The optimistic forecast stems from Freddie Mac’s report last week that the 30-year fixed rate mortgage is averaging 5.98 percent, the first time it has dipped below 6 percent since September 2022.

“This rate, combined with the improving availability of homes for sale, is meaningful,” said Freddie Mac chief economist Sam Khater, “and will drive more potential buyers into the market for spring homebuying season.”

According to a recent analysis by Zillow, today’s lower mortgage rate translates into significant savings. A median-income U.S. household can now afford a $331,483 home, a 10 percent improvement over last year, when the affordability threshold was just over $301,000.

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The $30,000 gain in buying power, coupled with flat home prices, could entice more buyers to pull the trigger. “It can mean the difference between settling and choosing,” Zillow stated. “That doesn’t suddenly make this market affordable for everyone, but it does crack open doors that had firmly shut when rates peaked.”

That’s a sharp contrast to October 2023, when the affordability index was $272,224 and mortgage rates averaged 7.62 percent, the highest monthly figure in more than 25 years. Recent rates had ranged from 6.96 percent in January 2025 to 6.1 percent a year later.

Zillow expects mortgage rates to decline even further this year. Right now, the monthly principal-and-interest payment on the average home is 8.4 percent lower than last year, the company said, noting that figure is based on a 20 percent down payment and doesn’t include taxes and insurance premiums.

That said, median-income earners can still expect to funnel almost one-third of their income toward their mortgage payment. But if lower rates and home prices continue to trend downward, potential buyers will discover a wider inventory of affordable properties.

 “A median-income household has seen roughly 82,300 more homes come into their budget than a year ago,” said Zillow senior economist Kara Ng.

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