There is a point in every conversation about housing where people lower their voices and admit what they are really feeling. Buying a home in America no longer feels like a milestone. It feels like a math problem that keeps getting harder no matter how many times you redo the numbers. A new report makes that reality plain. Housing affordability in the United States is not just worse than it was during the pandemic. It is considerably worse than it was five years ago, and the consequences are shaping everything from who gets to buy a home to how long younger Americans will delay major life decisions.
Oxford Economics found that the income needed to buy a typical single family home has nearly doubled since 2020, rising from $58,400 to $110,100. That kind of increase does not just push people to the sidelines. It redraws the entire map of who belongs in the housing market. Today, only 38 percent of American households earn enough to afford a median priced home. That is a steep decline from 57 percent in the third quarter of 2020.
This affordability collapse comes from two forces moving in the same direction. Home prices climbed sharply during the pandemic and have stayed high because supply remains tight. At the same time, mortgage rates have hovered at elevated levels, and those high rates have done more damage to affordability than price growth itself. According to the report, mortgage rates have nearly doubled monthly housing costs, and because early payments go mostly toward interest, buyers are building less equity while paying much more.
Goldman Sachs described the situation as a widening gap between home prices and incomes driven primarily by mortgage rates. Before the pandemic, the average monthly mortgage payment absorbed less than 20 percent of a household’s income. Since 2022, that number has climbed above 30 percent. For many families, that level is simply not sustainable.
The effects are visible nationwide. In the most expensive metros, affordability has all but collapsed. Places like San Jose, San Francisco, Los Angeles, Honolulu and San Diego now have a maximum of 17 percent of households who can afford local housing costs. Five years ago, that range ran between one fifth and one third. These declines explain why the share of first time homebuyers has crashed to a historic low of 21 percent, and why the average age of first time buyers has climbed to a record 40 years old. Younger adults are finding themselves locked out of homeownership far longer than past generations.
The supply side is straining under its own pressures. Homeowners who locked in ultra low mortgage rates during the pandemic are reluctant to sell, which keeps listings scarce. Builders face restrictive zoning, high land costs, slow permitting, and expensive materials. The National Association of Home Builders estimates the country is short roughly 1.5 million homes. Without closing that gap, demand will continue to outpace supply, and prices will remain high.
Economists warn that this mismatch between supply and demand reaches beyond individual families. When workers cannot afford to move, local economies stagnate. When housing costs soar, state and local budgets must stretch to address rising homelessness. When mobility declines, inequality widens, because the people who could benefit most from moving to stronger job markets often cannot afford to do so.
Buyer and seller psychology is also slowing the market. Many homeowners who bought during the pandemic still expect peak era prices and resist negotiating. Buyers, squeezed by higher rates and tighter budgets, push for concessions sellers refuse to give. The result is a market full of people waiting for someone else to blink.
Looking ahead, Oxford Economics expects mortgage rates to fall to around 6 percent by 2028. That will help, but it will not erase the problem. Home prices are projected to keep rising, although at a slower pace. Property taxes and insurance costs are expected to continue climbing as well, which will offset much of the relief borrowers might gain from lower rates.
The United States housing market is no longer dealing with short term volatility or a temporary pandemic distortion. It is grappling with long term structural issues that have built up over years. High prices, limited supply, elevated mortgage rates, and rising taxes and insurance have created a housing environment that large parts of the country simply cannot afford.
The future of homeownership will depend on how seriously the country takes the need for more supply, smarter zoning, lower regulatory barriers, and targeted policies that support first time buyers. Until then, millions of Americans will continue doing the same thing they have been doing for years. They will keep running the numbers, hoping the math eventually works in their favor. Go beyond the headlines…
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