Rates, Prices, and the Myth of “Easy Affordability”

Affordability is still the name of the game in real estate — or rather, the lack of it. While mortgage rates have hovered just under 7% and home prices have cooled slightly, 🔗 Zillow’s latest report makes it clear that the dream of affordability won’t return through minor rate cuts or price dips.

In fact, mortgage rates would need to fall all the way to 4.43% for a typical home to be affordable to the average U.S. buyer — a scenario experts say is unrealistic anytime soon.

📊 National Overview: The Harsh Math of Affordability

According to Zillow’s analysis, rates or prices would have to change dramatically to restore balance between incomes and home costs:

• 🏦 4.43% is the “break-even” affordability rate nationally.

• Even a 0% mortgage wouldn’t make homes affordable in ultra-expensive metros like New York, Los Angeles, Miami, San Francisco, San Diego, or San Jose.

• In those areas, just property taxes, insurance, and maintenance eat up over 10% of median income, leaving little room for mortgage payments.

• Boston and Seattle are nearly in the same boat — homes there would only be “affordable” if rates were under 1%.

🏡 Where Homes Still Work (Midwest & Inland South)

Not all markets are this out of reach. A few metros can still stomach rates well above today’s 6.7% and remain affordable: Pittsburgh (8.9%), Birmingham, St. Louis, Indianapolis, Oklahoma City, Buffalo, Detroit, Louisville, Cleveland, Chicago, and Memphis.

These areas benefit from modest prices, strong local wages, and lower taxes — a powerful combo that’s keeping buyers in the game.

🌵 Arizona Snapshot

Here in Arizona, the story lands somewhere in the middle. Phoenix’s “affordable rate” sits around 4.4%, just below the national threshold — which means affordability is tight but not impossible. Compared to coastal markets, Arizona still offers opportunity, but incomes haven’t fully kept pace with rising home values.

Buyers relying on high down payments or first-time buyer programs are feeling the squeeze most, even as local price growth stabilizes. If rates hold steady or dip slightly, Phoenix and Tucson could re-emerge as affordability sweet spots — especially for buyers relocating from pricier states.

💰 Why Price Drops Alone Won’t Fix It

Zillow projects a modest 2% home value decline nationwide by year-end — hardly enough to move the affordability needle after a 49% increase since 2019.

To restore affordability without rate relief, home prices would need to drop by roughly 18% — a crash that would only happen with major economic slowdown or rising unemployment.

🏗️ The Real Fix: Build, Don’t Wait

For lasting affordability, the solution isn’t in waiting for rates or prices to crash — it’s in supply.

Only through building enough homes to close the national housing deficit can affordability truly return. Until then, even “small wins” in rate reductions will feel like drops in a very expensive bucket.

📬 Bottom Line

If you’re waiting for rates or prices to fall before buying, it might be time to rethink the plan.

Smart buyers are adjusting expectations — exploring down-payment assistance, seller credits, or buy-down options to get ahead of the curve.

Ready to run numbers or explore a creative financing solution?

DM me or reach out today — let’s make a plan that works for you.