Lower mortgage rates and higher incomes gave seasoned borrowers fresh room to upgrade
A typical US household clawed back a meaningful slice of buying power after two punishing years of rate shocks.
Zillow's data showed that a median‑income borrower putting 20% down could now afford a home priced around $331,483. That's roughly $30,000 more than a year earlier and the highest affordable price point since March 2022.
Those gains were driven by a combination of easing mortgage rates, softer home‑price growth and modest income increases.
The typical mortgage payment, excluding taxes and insurance, was about 8.4% lower than a year earlier, with 30‑year rates having slipped from an average 6.96% in January 2025 to about 6.1% in January 2026.
Even so, Zillow still estimated that a typical home took about 32.6% of median household income – an improvement from October 2023, but still well above pre‑pandemic levels.
Affordability rebound widened options in key metros
“A more than $30,000 gain in buying power is meaningful for households that have been stretched thin by high rates. It can mean the difference between settling and choosing,” said Kara Ng, senior economist at Zillow.
“That doesn’t suddenly make this market affordable for everyone, but it does crack open doors that had firmly shut when rates peaked.”
Those doors opened widest in the priciest coastal hubs. Zillow’s metro‑level breakdown showed median‑income buyers in San Jose had almost $74,000 more buying power than a year earlier, with San Francisco up about $56,000 and Washington, D.C., San Diego and Boston each seeing gains in the mid‑$40,000s.
In practical terms, a typical US household could afford roughly 82,300 more homes than a year earlier, aided by a 6% rise in inventory that brought the share of listings within reach up to just over 40% of the market.
Zillow’s economists already projected that, by year‑end, mortgage payments on a typical home would be affordable in about 20 of the 50 largest US metros – the broadest improvement since 2022, assuming payments stayed below 30% of income.
In a separate outlook, the firm expects home values to rise only modestly, about 1.2% in 2026, while existing‑home sales increase roughly 4% as pent‑up demand meets slightly better affordability.
Tools, rate shopping and a cautious playbook for 2026
For loan officers and brokers, the shift underlines how rate moves and borrower profiles intersect.
“Even a small difference in rate could meaningfully shrink a monthly payment and expand the number of homes within reach,” Ng said in an earlier briefing on rate shopping, noting that most buyers still applied with only one lender.
Citadel Mortgages broker Tristan Kirk previously told Canadian Mortgage Professional that US borrowers often enjoyed richer down‑payment assistance and longer‑term fixed products than their Canadian counterparts, giving first‑time buyers a huge edge when affordability temporarily improved.
Still, industry forecasters warned that the gap between affordability and true accessibility remained wide. A 2025 National Association of Realtors estimate suggested that if rates settled near 6%, roughly 5.5 million additional US households could qualify for a median‑priced home.
For originators heading into the spring selling season, improved buying power has given many borrowers room to trade up from just getting in to homes that genuinely fit their needs. Capitalizing on that window would depend less on headline rate moves and more on how effectively lenders help experienced buyers navigate product selection, rate shopping and fast‑moving local inventory while the affordability tide is finally moving in their favor.
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