Rising mortgage rates push homeownership beyond reach for median-income families

Mortgage rates surged to a 7.4% average on 30-year fixed loans, the highest level since 2023, sharply reducing housing affordability. The Atlanta Fed’s affordability tracker defines qualified income as the amount needed to keep housing costs under 30% of earnings, and that figure now sits at about one and a half times the median household income, a divergence that started in 2021. Domonic Purviance of the Atlanta Fed explained that incomes would have to rise by roughly 46% to close the gap if prices and rates stayed constant.

While cities like Austin have experienced some price moderation, the effect on overall affordability is minimal. Redfin’s chief economist Daryl Fairweather noted that new single-family home sales rose from July to August, even as existing-home sales fell, and that about 20% of active listings featured price cuts, though the average discount has narrowed since 2012. Builders are increasingly offering rate buydowns and cash-at-closing incentives to attract buyers in this strained market.