More borrowers could see relief, but only if rates, prices and incomes move in tandem
Homes in 20 of the nation’s 50 largest metropolitan areas are expected to meet a basic affordability test by December 2026, according to a new Zillow market report that pointed to the broadest improvement since 2022. The scenario suggests a modest opening in a market that has been defined by sticker shock since the pandemic boom.
Zillow defines an affordable home as one where a mortgage payment on a typical property does not exceed 30% of median household income – a threshold beyond which housing costs become a financial burden and squeeze other essentials such as food and transportation.
At the national level, that payment currently took 32.6% of income, down from a peak of 38.2% in October 2023, and is projected to ease further to 31.8% by year-end.
“This is what a small-wins year looks like for housing,” said Zillow senior economist Kara Ng.
“Rising incomes, subdued price growth, and gradually easing mortgage rates would help buyers regain their footing while allowing homeowners to continue building wealth. These types of slow and steady affordability improvements are exactly what the housing market needs over the long-run.”
Zillow assumed 30‑year rates would drift toward 6%, home values would grow 1.9% to a typical $365,795, and incomes would climb 3.3% based on Bloomberg consensus estimates.
Affordability is expected to improve in every major market except Hartford, where stronger price gains are forecast even as the metro is pegged as the “hottest” market for 2026.
Chicago, Atlanta and Raleigh are set to join the list of metros where a typical home met the 30% test, while buyers in coastal hubs such as Los Angeles, San Diego and San Jose still face mortgage burdens above 55% of median income.
Monthly costs have already eased. Using a December average mortgage rate of 6.2% and a 20% down payment assumption, Zillow puts the typical payment at $2,337 – $92 less than a year earlier and $177 below the October 2023 peak.
However, the 20% down payment itself remains a hurdle: on a $359,078 home, that meant nearly $71,800 in cash, rising above $73,000 if Zillow’s appreciation forecast held.
Other indicators have echoed a gradual turn. Freddie Mac’s latest Primary Mortgage Market Survey showed the average 30‑year fixed rate at 6.06% in mid‑January 2026, down from 7.04% a year earlier.
First American chief economist Mark Fleming struck a similar note of cautious optimism. “Affordability remains challenging, but for the first time in several years, the underlying forces are finally aligned toward gradual improvement,” he said.
“Mortgage rates may drift down only slowly, but income growth exceeding house price appreciation will provide a boost to house-buying power – even in a higher-rate world.”
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