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Housing Is Improving. Affordability Still Isn’t
The Numbers Are Moving in the Right Direction
Buying a home became slightly more affordable in April for the seventh straight month.
The income needed to afford a typical U.S. home fell to about $117,000, down from roughly $119,000 a year ago. Mortgage rates eased, incomes rose 4%, and monthly housing costs declined slightly.
After several years of affordability steadily moving in the wrong direction, the trend has finally reversed.
The Problem: The Typical Family Still Falls Short
The average U.S. household earns about $88,000 a year and is still nearly $29,000 short of what’s needed to afford a typical home.
In practical terms, the average buyer would need to spend about 40% of their income on housing. That's an improvement from 42% last year, but it remains well above the traditional affordability threshold of 30%.
More Homes Are Affordable, But the Starting Point Has Changed
About one-third of homes on the market are now affordable for a median-income household, up from around 29% a year ago.
That sounds encouraging until you take a step back.
Before mortgage rates surged in 2022, more than half of listed homes were typically affordable. Today's improvement is coming from a much weaker starting point.
Geography Matters More Than the National Average Suggests
Affordability improved across most major metro areas, especially in places like Chicago, Dallas, and Seattle.
National numbers point to two very different housing markets.
In parts of the Midwest, median-income households can still afford median-priced homes. In cities such as Detroit, Pittsburgh, and St. Louis, affordability remains relatively intact.
Meanwhile, in coastal markets, housing costs have become increasingly disconnected from local incomes. Buyers in San Francisco need roughly $444,000 in annual income to afford a typical home. In Los Angeles, housing would consume nearly three-quarters of the median household's income.
It is becoming increasingly difficult to talk about a single U.S. housing market.
The Improvement May Be Fragile
The main reason affordability improved was lower mortgage rates.
The problem is that mortgage rates moved higher again in May, threatening to slow a trend that had been improving for seven straight months.
The housing market finally has some momentum on its side. Whether that momentum survives the next few months is another question. Affordability is improving, but it still depends on a rate environment that has yet to show any real consistency.
The Fixed-Rate Mortgage That Doesn't Stay Fixed
The Promise vs. Reality
For years, homebuyers have been told a simple story: if you get a fixed-rate mortgage, your monthly payment will never change.
The problem is that, for most homeowners, that is only partially true.
Roughly 80% of borrowers pay through escrow accounts, meaning their monthly payment includes not only principal and interest, but also property taxes, homeowners insurance, and in some cases mortgage insurance. The interest rate on the loan may be fixed, but the total payment often is not.
Property taxes have risen alongside home values. Insurance premiums have climbed even faster in many markets, especially in areas exposed to floods, fires, hurricanes, hail, and other climate-related risks.
As a result, many homeowners who believed they had locked in their housing costs are discovering that a "fixed" mortgage can still lead to higher monthly payments over time.
The numbers are uncomfortable. Many borrowers have experienced increases in property taxes, insurance costs, or both. Nearly half say that a 10% increase in their monthly housing expenses would create financial hardship.
The risk is no longer limited to the mortgage rate itself. It includes everything that comes with it.
The Industry Is Still Telling an Incomplete Story
The real criticism is not aimed at mortgages, but at the way homes are sold.
Agents often focus on interest rates, down payments, and monthly affordability at the time of purchase. Far less attention is given to how property taxes and insurance costs may evolve after the transaction closes.
Buyers tend to use today's payment as their reference point and assume it will remain largely unchanged.
Yet part of that payment depends on costs that can rise over time.
When the Numbers Stop Working
If property taxes and insurance costs increase enough, escrow accounts can fall short.
Homeowners are then faced with difficult choices: making a lump-sum payment, negotiating with their lender, absorbing a higher monthly payment, or, in more severe cases, selling the property.
Foreclosure remains a last resort, and most lenders prefer to find alternatives before reaching that point.
The challenge is that a home can appear affordable on the day it is purchased and become far less affordable years later as the costs surrounding the mortgage continue to rise.
The Bigger Shift
For years, the conversation around housing affordability focused almost entirely on interest rates. Today, property taxes and insurance costs are becoming equally important variables.
A fixed-rate mortgage still fixes the interest rate on the loan. What it does not fix is the total cost of owning a home.
That may sound obvious when stated plainly. Yet enough buyers continue to misunderstand the distinction that it has become part of the affordability problem itself.
The reality is that many homeowners believed they were buying certainty when, in fact, they were buying only partial protection.
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The Price Objection Isn’t Really About Price
The Instinct That Loses Deals
When a client says, “Your competitor is cheaper,” most salespeople interpret it as a threat and react accordingly.
They either lower their price, weakening their position, or launch into a long defense of their value proposition. Both responses start from the same assumption: that the conversation is about cost.
A Small Shift in Control
Instead of defending yourself, you do something unexpected: you agree.
“Yes, they probably are. Why do you think that is?”
Rather than arguing, you ask the client to explain what they're actually thinking. The conversation stops being about defending yourself and becomes about understanding what the client believes.
People are often less certain about their objection than they appear.
What the Client Reveals
Once they're asked to explain it, clients often reveal the real concern.
Maybe they're focused on fees. Maybe they believe the competitor has stronger local expertise. Or maybe they're repeating something they've heard without much conviction.
In each case, the answer provides useful information. The salesperson no longer has to guess which concern they're trying to address.
And sometimes the client discovers the weaknesses in their own argument while trying to explain it.
What Happens When You Stop Defending
Agreeing that someone else is cheaper removes some of the tension. It conveys confidence and signals that you don't believe the entire decision comes down to a simple price comparison.
Of course, this approach assumes there is real value beyond price. If there isn't, no clever question is going to fix that.
But when that value exists, the fastest path may be to stop selling for a moment and allow the client to explain what they're actually buying.
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TL;DR (Too Long; Didn’t Read)
Housing affordability is finally improving, but the improvement remains modest. The typical household still falls well short of what’s needed to buy the typical home, and much of the recent progress depends on mortgage rates that have already started moving higher again. At the same time, many homeowners are discovering that a fixed-rate mortgage only fixes the interest rate, not the total cost of ownership. Rising taxes and insurance costs are becoming a larger part of the affordability equation long after the purchase is complete.Outside housing, the same idea appears in a different form. What looks like a price objection is often something else entirely. Buyers frequently raise cost concerns when the real issue is trust, confidence, or uncertainty about the differences between two options. Sometimes the fastest way to understand an objection is to stop answering it.
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-Market Minds Team
The content of Market Minds is provided for informational purposes only and reflects personal opinions based on sources believed to be reliable. It does not constitute financial, investment, legal, or professional advice. Each reader is solely responsible for their own decisions.