Housing affordability is expected to take center stage in 2026, with President Donald Trump promising to announce “the most aggressive housing reform in history” early in the new year.
The affordability crisis has weighed heavily on the housing market for three straight years, pushing home sales to their lowest levels in three decades. The typical first-time homebuyer is now 40 years old, a record high.
A new analysis from the Realtor.com® economic research team considers what it would take to restore home affordability to 2019 levels, when the typical mortgage payment was about 21% of the median household income, compared with more than 30% today. The analysis finds it would take:
- Mortgage rates falling to 2.65%, down from 6.15% currently, or
- Incomes rising 56% to a median of $132,171, up from $84,763 currently, or
- Home prices falling 35% to a median of $273,000, down from $418,000 last year.
None of these outcomes are likely or expected in 2026. But the figures underscore the challenge of restoring the housing market to the relatively affordable conditions of 2019, before the COVID-19 pandemic brought severe disruptions.
Of course, some combination of these three factors could also achieve the same result in affordability—although the combinations required to fix the affordability crisis are also unlikely in the near term.
For example, if mortgage rates dropped to 4%, while concurrently incomes rose 10% and home prices dropped 9%, mortgage payments would equal 21% of income. That scenario is unlikely, in part because soaring incomes and falling rates would likely drive home prices up quickly.
On the other hand, if mortgage rates hold steady at 6%, and wages and home prices continue to grow at their 2025 pace, the market would not return to pre-pandemic affordability until 2047, 21 years from now.
“Taken together, the figures suggest that affordability constraints today are less about home prices alone and more about the interaction between prices and elevated borrowing costs,” says Realtor.com senior economic research analyst Hannah Jones.
Jones says that unless mortgage rates, incomes, or home prices change by a sizable and unusual amount, “affordability is likely to remain historically strained, reinforcing the lock-in effect for existing homeowners and keeping entry barriers high for first-time buyers.”
In addition to mortgage payments, homebuyers have to budget for the cost of taxes, insurance, and utilities, which have all risen in recent years.
Including those costs on top of a mortgage payment that is 21% of income brings the typical total cost of homeownership to just around 30% of income, which is the threshold for affordability defined by the Department of Housing and Urban Development.
The affordability gains that are actually expected in 2026
In reality, the Realtor.com economic research team forecasts that mortgage rates will average around 6.3% this year, while household incomes will rise 3.6% and home prices will grow by 2.2%.
Those trends would push the typical mortgage payment down slightly to around 29% of median income, which would mark the first move below 30% since 2022.
That would mark a modest improvement in affordability conditions. But the typical homebuyer would still expect to budget well above 30% of their income for homeownership costs, after adding taxes, insurance, and utilities to their mortgage payment costs.
To address the affordability crisis, Trump has focused heavily on lower mortgage rates. He recently admitted that he didn’t want to allow home prices to fall, lest existing homeowners suffer a loss of equity.
The new analysis shows that to regain 2019 levels of affordability with mortgage rates alone, rates would have to fall to 2.65%.
That would matching the all-time low for mortgage rates reached on Jan. 7, 2021, when the federal funds rate was at zero and 10-year Treasury notes paid a paltry 1% interest.
On the campaign trail in 2024, Trump repeatedly promised to bring mortgage rates back down to 3% or lower. In reality, achieving rates that low would likely require a severe recession with massive job losses and soaring unemployment.
That’s because mortgage rates, and other long-term interest rates, are set by the free market, and are not under the direct control of the president or even the Federal Reserve.
While the Fed has been cutting its short-term interest rate, and Trump will soon appoint a new Fed chair in favor of further cuts, the Fed’s policies typically influence mortgage rates only loosely and indirectly.
In theory, the Fed could drive mortgage rates lower by buying up trillions in mortgage-backed securities, but making such a move outside of a time of economic crisis would be an unprecedented step.
“Any action specifically targeting mortgage rates is well outside of the Federal Reserve’s dual mandate of price stability and full employment, so I would not expect the Fed to take this on in 2026, even with a new chair,” says Realtor.com senior economist Jake Krimmel. “High rates have been a pain for the housing market, but that has not triggered any macro crisis worthy of Fed intervention.”
Krimmel also notes that if policymakers did manage to force mortgage rates to ultra-low levels, it would probably just send home prices soaring again, similar to what happened during the pandemic crisis.
Ultimately, most economists believe the solution to the affordability crisis lies in expanding housing supply through more construction, especially in markets where supply is tightest.
“Hypothetically, if the Fed magically forced mortgage rates to 3% overnight that could risk some serious economic overheating,” says Krimmel. “You don’t really solve an affordability crisis by subsidizing demand through artificially cheap financing.”