Middle-income homebuyers can afford just 21% of homes currently on the market, down from approximately 50% before the pandemic, according to data from the National Association of Realtors. The median home price has reached a record $412,500.
"The historically low share of first-time buyers underscores the real-world consequences of a housing market starved for affordable inventory," said Jessica Lautz, NAR economist.
Lenders face compressed origination volumes as affordability constraints limit qualified borrowers. The percentage of middle-income households meeting underwriting criteria for median-priced homes has fallen by more than half since 2019.
Market conditions show signs of easing. Economists project 14% growth in home sales for 2026 as inventory levels improve and the mortgage lock-in effect diminishes. "We are seeing a little better condition for more home sales with more inventory and the lock in effect steadily disappearing because life changing events are making more people list their property to move on to their next home," said Lawrence Yun, NAR chief economist.
Price appreciation is expected to moderate to 2-3% in 2026, down from recent double-digit gains. Wage growth is forecast to outpace both inflation and home price increases, gradually restoring affordability metrics.
The stabilization carries implications for consumer lending portfolios. Housing costs represent the largest expense for most households, and reduced price pressure may free up disposable income for debt service on other obligations. Banks with heavy concentrations in home equity lines of credit could see utilization rates shift as homeowners regain purchasing power.
First-time buyers remain largely sidelined despite stabilization signals. Down payment requirements and debt-to-income ratios keep entry-level buyers out of the market even as conditions improve marginally for existing homeowners trading up.
Inventory dynamics favor sellers in most markets, though the gap is narrowing. The lock-in effect—homeowners reluctant to sell and lose low mortgage rates—has kept supply constrained since 2022. Life events including job relocations, family changes, and retirements are forcing more listings despite rate differentials.
"Even with progress in affordability, middle income buyers can afford to buy just 21% of the homes currently available for sale," said Nadia Evangelou, NAR senior economist. The metric underscores persistent challenges for mortgage originators targeting conventional purchase loans.
Regional variations remain significant, with affordability recovering faster in markets that saw the largest pandemic-era price spikes.