The Housing Affordability Crisis: What's Driving Prices and What Can Be Done

America's housing market enters 2026 facing what economists describe as among the most challenging affordability environments in modern history. The Atlanta Fed's Housing Ownership Affordability Monitor shows that owning a median-priced home consumes a staggering 47.7% of median household income—a level that has remained in the punishing 40-50% range for two years.

The Numbers

Mortgage rates, while below their 2023-2024 peaks, remain elevated. The 30-year fixed rate averaged 6.6% in 2025 and is forecast to average 6.3% in 2026. However, more than 52% of mortgages are still under 4%, creating significant reluctance to sell.

Home prices jumped 27% to 80% depending on the market over the past five years. While economists forecast only modest 0.5-4% price increases in 2026, affordability won't improve through price corrections.

Supply Constraints

The U.S. housing market remains fundamentally undersupplied, with Zillow estimating a national deficit at an all-time high of 4.7 million units. Inventory is expected to rise another 10% in 2026 due to both new listings and longer time-on-market.

Zoning and land-use policies present major limitations. Townhomes represent a bright spot for affordability, but zoning laws often limit the density needed to build them.

The Lock-In Effect Fades

By the end of 2025, more American homeowners have mortgages above 6% than those with ultra-cheap loans below 3%. In 2026, roughly 10 million homeowners will have mortgages above 6%, creating a growing pool of potential sellers who won't feel anchored in place.

Geographic Variations

Previously hot markets like Texas and Florida have seen some price declines from peaks, with Austin and West Florida now offering buyers opportunities. Sun Belt metros that built heavily—Austin, Phoenix, Orlando, Denver, Dallas—may continue offering rental concessions as supply catches up with demand.