The American dream of homeownership has never felt more distant. A comprehensive new analysis from Bankrate reveals that more than 75% of homes currently on the market are unaffordable to the typical American household—and the average prospective buyer is roughly $30,000 short of what it takes to comfortably purchase a median-priced property.

The Affordability Chasm

The numbers paint a stark picture of housing market dysfunction. Americans now need at least a six-figure salary to comfortably afford a typical home in most markets, yet the average American salary hovers around just $64,000. This gap between earning power and housing costs has widened dramatically since the pandemic.

Middle-income buyers—those earning between 80% and 120% of their area's median income—can afford to purchase just 21% of homes currently available for sale. Before the pandemic, that same group could afford approximately 50% of the market. The erosion in purchasing power has been swift and devastating.

"What we're seeing is a fundamental breakdown in housing market accessibility," said Jeff Ostrowski, Bankrate's housing analyst. "The combination of elevated prices and high mortgage rates has created an affordability crisis unlike anything we've experienced in the modern era."

The Mortgage Rate Squeeze

While home prices receive the bulk of attention, mortgage rates have been equally punishing for prospective buyers. The average 30-year fixed mortgage rate stands at approximately 6.16% in January 2026—more than double the sub-3% rates that prevailed during the pandemic's height.

This rate environment dramatically increases monthly payments. A $400,000 home financed at 2.75% (available in early 2021) would cost roughly $1,633 monthly. That same home at today's 6.16% rate costs $2,434—a difference of $800 per month, or nearly $10,000 annually.

Most forecasters expect rates to remain above 6% throughout 2026. Redfin projects 30-year fixed rates will average 6.3% for the year, while Bankrate's Ted Rossman predicts rates will "bounce around 6%—sometimes a little lower, sometimes a little higher—throughout much of 2026."

The First-Time Buyer Crunch

First-time homebuyers face the harshest headwinds. Without equity from a previous home sale, they must save for down payments while paying rent that has also surged in recent years. The result: the average age of a first-time homebuyer has climbed to an all-time high of 40 years, according to the National Association of Realtors.

This represents a dramatic shift from historical norms. In the 1980s, the typical first-time buyer was in their late 20s. The steady march upward reflects not only housing costs but also student debt burdens, delayed marriage, and the rising cost of living more broadly.

"An entire generation is being locked out of homeownership," observed Lawrence Yun, NAR's chief economist. "The consequences extend beyond individual households—they affect family formation, wealth accumulation, and community stability."

Regional Variations

The affordability crisis doesn't affect all markets equally. Coastal cities and tech hubs face the most severe constraints, while some Midwest and Southern markets remain relatively accessible.

Home prices are rising fastest in the Northeast and Midwest, where limited new construction has kept inventory tight. Hartford, Connecticut; Rochester, New York; and Worcester, Massachusetts lead Realtor.com's list of top housing markets for 2026—largely because they remain more affordable than major metros.

In contrast, markets in the South and West are showing signs of softening as pandemic-era migration slows and insurance costs climb. Phoenix, Austin, and Boise—pandemic darlings that saw explosive price growth—have experienced modest corrections.

The Three Factors That Could Help

Fortune recently analyzed what it would take to restore housing affordability to pre-pandemic norms. The conclusion was sobering: the three factors that could make homeownership accessible again are "very unlikely" to materialize.

Those factors include:

  • A significant drop in home prices: Prices would need to fall 20-25% to restore historical affordability metrics—something that typically only happens during severe recessions
  • A return to ultra-low mortgage rates: Rates would need to drop back below 4% to meaningfully improve monthly payments, which would require either deflation or a major economic crisis
  • A surge in wage growth: Incomes would need to rise substantially faster than inflation for several consecutive years

None of these scenarios appears imminent. Home prices remain supported by limited inventory, rates are constrained by inflation concerns, and wage growth has moderated from its post-pandemic peaks.

The 'Lock-In Effect' Shows Signs of Breaking

One dynamic that has exacerbated the affordability crisis is the so-called "lock-in effect." Homeowners who refinanced at pandemic-era lows are reluctant to sell because purchasing a new home would mean taking on a much higher rate. This has constrained inventory and supported prices.

However, there are signs this effect is beginning to ease. As life circumstances change—job relocations, family growth, divorces, deaths—more homeowners are being forced to sell regardless of their locked-in rates. Time is also working its magic: the longer rates remain elevated, the more normalized they become in buyer expectations.

"Something big just happened in the U.S. housing market," observed one real estate CEO in a recent interview with Fortune. "The lock-in effect is finally starting to break."

A Glimmer of Hope

While the big picture remains challenging, some forecasters see modest improvement ahead. Zillow's senior economist Kara Ng noted that "2026 is shaping up as the year for small wins. Affordability is set to gradually improve as modest rises in home values means that incomes can catch up."

NAR data suggests monthly payments could decline for the first time since 2020. With mortgage rates expected to be slightly lower than 2025 averages and home price growth projected at just 2%, affordability metrics should improve modestly—even if they remain far from historical norms.

What Prospective Buyers Can Do

For those determined to buy despite the challenging environment, financial advisors recommend several strategies:

  • Expand your geographic search: Markets in the Midwest and some Southern states remain relatively affordable
  • Consider smaller or older homes: Entry-level properties, while scarce, offer a foothold in the market
  • Explore down payment assistance: Many states and localities offer programs for first-time buyers
  • Lock in rates strategically: With rates fluctuating, rate locks can provide certainty during the purchase process
  • Build credit and savings: The strongest buyers will be positioned to act when opportunities emerge

The Long View

Housing affordability has been a challenge for Americans for decades, but the current crisis represents an acute acceleration of long-running trends. The pandemic's distortions—rock-bottom rates followed by rapid inflation—compressed years of normal market evolution into months.

The $30,000 gap between what Americans earn and what housing costs may narrow over time, but a return to the accessibility of previous decades appears unlikely. For a generation of would-be homeowners, the dream has become a stretch goal rather than an expectation.

As one frustrated house-hunter told researchers: "I did everything they told me to do—went to college, got a good job, saved my money. And I still can't afford a home. Something is fundamentally broken."