Housing affordability saw an improvement in June compared to the previous year, even as median home prices surged to a record high of $440,600. This apparent contradiction is attributed by economists to a combination of robust income growth and a slight decrease in mortgage rates.
The National Association of Realtors (NAR) reported that its Housing Affordability Index (HAI) increased to 102.3 nationally, up from 95.5 a year prior. An index above 100 indicates that a family earning the median income has sufficient income to qualify for a mortgage on a median-priced home, assuming a 20% down payment.
Economic Factors Bolster Affordability
Experts point to wage growth outpacing home price appreciation as a key driver. U.S. wages grew at an annual rate of 3.5%, significantly higher than the 1.8% year-over-year increase in home prices. Concurrently, the average rate on a 30-year fixed mortgage fell from 6.82% in June 2025 to 6.49% last month, according to Freddie Mac data.
"While prices reached another record high, incomes have continued to grow faster than prices, and mortgage rates are slightly lower than a year ago," said Nadia Evangelou, NAR principal economist and director of real estate research. "Together, those factors have helped improve affordability despite higher home prices."
This trend was observed across all four U.S. regions, with the West leading in affordability gains at 8.9%, followed by the South at 8.3%. The Midwest and Northeast also saw modest improvements, with gains of 6.2% and 4.5%, respectively. Regional differences in affordability improvements are linked to the varying rates of local wage growth relative to local home price increases.
Homebuyer Outlook and Market Challenges
While the current market offers more opportunities for buyers than in recent years, experts caution that this improvement is primarily due to favorable income and rate dynamics rather than softening prices. The duration of this affordability window is uncertain and depends significantly on future mortgage rate movements.
Realtor.com's forecast projects mortgage rates to ease to 6.3% by the end of the year, though geopolitical uncertainties could impact this outlook. Nevertheless, consistent wage growth exceeding price growth may continue to support gradual affordability improvements.
Despite these positive indicators, challenges remain, particularly in regions with limited housing supply and new construction. NAR Chief Economist Lawrence Yun emphasized the ongoing difficulty for many consumers in purchasing a home and stressed the critical need for increased housing supply. Strategies to address this include converting underutilized commercial spaces into residential units and streamlining regulations to accelerate construction.
"From everyday consumers’ perspective, buying a home is very difficult, independent of whether affordability slightly improved from one year ago, or affordability is more difficult compared to last month," Yun stated. "So without a doubt, the affordability is a major challenge for people who want to become homeowners, which is the reason why we need more supply."