Where and Why Housing Is Becoming Unaffordable

The Details Behind Home Costs

It’s been a rough few years for home buyers, especially first-time purchasers eager to embark on the path to homeownership. A perfect storm of unfavorable conditions – including continued high list prices, steeper mortgage rates, prolonged inventory shortages, and steep property tax and insurance bills – has put the squeeze on Americans and contributed to their inability to form households or move up or down to next properties. While there are some positive signs in the market lately, many areas remain unaffordable to a wide swath of prospective owners.

Let’s take a closer look at how we got to this point, the various challenges buyers face, key metros where prices remain out of reach, and predictions from the experts on affordability looking ahead.

Housing Affordability: Why the Crisis Has Deepened

The latest numbers paint a sobering picture for aspiring home buyers. Per the National Association of Realtors’ (NAR) latest data (October 2025), the median sales price for all housing types is currently $415,200, an increase of 2.1% from one year ago and the 28th straight month of year-over-year price increases. Home prices rose in 77% of metro areas (176 of 230) during the third quarter of 2025, up from 75% in the previous quarter. Around 4% of metro markets posted double-digit gains, slightly below the 5% recorded in the second quarter.^[1] 

The New Barriers to Homeownership

Add to these hurdles the increasing concern over rising homeowners insurance rates.

“Insurance has become more expensive and, in some regions, harder to secure due to climate-related risks,” explains Beth Swanson, one of The Zebra's insurance analysts. She points to California as an alarming example of a state where steep increases in both home prices and home insurance costs – driven mainly by climate risk and the rising expense of rebuilding – are putting extra pressure on homeowners and buyers alike. “The data show higher-frequency, higher-severity events in recent years. Losses like these translate into higher insurance premiums, stricter underwriting, or in some areas, fewer insurers willing to write new policies.”

Dennis Shirshikov, a professor of finance and economics at Queens College, CUNY, believes a lack of buying confidence is another recent impediment to purchasing.

“Just a few years ago, the talk about what was preventing Americans from gaining a foothold in the housing market centered on student debt, down payments, and price appreciation,” Shirshikov says. “Today, however, another growing impediment is economic confidence. House hunters are asking themselves: Am I willing to buy when so much else feels wrong?”^[5]

What’s more, current homeowners remain reluctant to list their properties for sale.

“They’re not willing to give up the 2.5% to 3.5% mortgages they secured a few years ago to trade up to a bigger, more expensive home with a 6.5% mortgage today,” says Rick Sharga, president and CEO of CJ Patrick Company.^[6]

Identifying Regional Housing Trends

Median prices for existing single-family homes vary across regions, the NAR reports.

• In the Northeast, prices have risen to $540,100 (up 6.0%).
• In the Midwest and South, they’ve hit $331,100 (up 4.2%) and $372,800 (up 0.5%), respectively.
• Prices in the West, meanwhile, dipped slightly to $633,900 (down 0.1%).

Price gains were most robust in locations with tight housing supply, particularly in the Northeast and parts of the Midwest, while modest declines in several southern markets show the impact of significant new construction. But these softer Southern prices are considered temporary, a hypothesis bolstered by strong job growth.

“The South and Midwest are generally more affordable, because it’s easier to build there. The Northeast and West, meanwhile, tend to be more expensive due to land constraints and regulations. That gap is likely to stick around,” continues Evangelou.

But Sharga notes that Midwest and Northeast markets, where inventory remains extra low, are still seeing home prices increase by 3% to 6%.

“However, in other parts of the country, particularly the South, Southeast, and Mountain states, where inventory is much higher, we are seeing prices fall,” he adds. 

Housing Forecast: Will Affordability Improve Anytime Soon?

The experts spot a few silver linings among the affordability gray clouds. First, the NAR noted in its third quarter report that 23% of markets saw home prices decline. Additionally, the typical existing single-family home with a 20% down payment now carries a slightly lower monthly mortgage of $2,187, down 2.8% from the previous quarter, with families spending an average of 24.8% of their income on payments, down from 25.6% last quarter and 25.2% last year. Also, first-time buyers are allocating a slightly smaller portion of their income to payments: 37.4% versus 38.6% last quarter and 38.1% a year earlier.

“Also, more inventory is coming. Realtor.com has forecast an 8.9% increase in existing inventory for 2026. More listings lead to more supply – and more negotiating power for buyers,” says Lord. “Also, price cuts are becoming common. The average time to sell a home is longer now (62 days), which gives buyers an advantage. Additionally, institutional investors are now net sellers for six consecutive quarters; almost 45% of their sales go to traditional buyers. And more politicians are paying attention to this focus on housing. So far, 22 states have introduced favorable legislation to make housing more affordable, while zoning reforms have gained traction in a few states.”

Selma Hepp, senior vice president and chief economist for Cotality, also expresses optimism for buyers in 2026.^[9]

“Price momentum has cooled, listings are rebuilding, more builders are offering incentives like rate buy-downs to buyers, and rates are easing, creating more choices for first-time buyers,” she says. “I expect gradual, uneven improvement into 2026, with rates remaining in the low 6% range, flatter home prices, and modest inventory gains.”

Shirshikov anticipates that affordability will continue to improve at the national level over the next few years, though not at the pace most buyers and renters would prefer.

“There will be wild price variations from region to region and metro to metro. The most likely outcome is not a crash in home prices across the country, but a gradual adjustment in which mortgage rates fall back from their recent highs and income slowly catches up, with expectations of price growth to average out over the longer run,” he says. “I’m encouraged that the market has begun to transition from ‘panic and bid up the price to whatever it takes’ in many metros. Moving toward a more balanced price-bidding environment matters because expectations drive behavior. Overall, the indications are that we could be past the worst of the mortgage payment shock if rates continue to slip as they have been.”

Sharga reminds readers that current home price appreciation (2.1%) is actually lower than the rate of inflation (3%) and wage growth (roughly 4%).

“In some markets, especially states like Florida and Texas, and certain metro areas where home prices skyrocketed during COVID, like Boise, Las Vegas, and Phoenix, prices have actually declined year-over-year while mortgage rates are down by about a half percentage point,” continues Sharga. “That combination – rising wages, flat or declining home prices, and lower mortgage rates – will help at least some buyers be able to afford to become homeowners in 2026.”