Why homes are getting more affordable and how to build on this positive momentum

For buyers who felt squeezed out of the market over the past few years, conditions are starting to look more favorable. Buying power has increased from a year ago according to a new Zillow analysis, bringing more homes within reach and raising expectations for a busier spring home shopping season.

The shift is threading a needle that is creating a win-win for buyers — better affordability without falling home prices. Home buyers are able to afford more of what’s on the market, while sellers benefit from steadier demand. 

The key ingredient to pulling this off is lower mortgage rates. And Zillow sees a path to further improvements this year that would unlock even more affordability gains. 

Affordability gains are expanding options

A median-income U.S. household can now afford a $331,483 home, assuming a 20% down payment — a $30,302 improvement from a year ago and the highest affordable price since March 2022. Roughly 40% of listings nationwide are now within reach of a median-income buyer, up from 35% last year. 

In practical terms, that means a median-income household can now afford about 82,300 more homes for sale than a year ago. Tighter affordability typically means even buyers who are able to afford a home must compromise on a home’s location, size or features. The improvement over the past year can be the difference between settling and choosing.

Lower mortgage rates are doing the heavy lifting

The affordability improvement has not come from falling prices — home values nationally are essentially flat, up just 0.2% from a year ago. Instead, lower borrowing costs are driving affordability gains.

The average 30-year mortgage rate has fallen from 6.96% last January to 6.1% in January 2026. That decline combined with flat home values has reduced the typical monthly mortgage payment (assuming a 20% down payment and excluding taxes and insurance) by 8.4% year over year. 

As rates move, home shoppers can track their buying power in real-time with Zillow Home Loans’ BuyAbility℠ tool. BuyAbility provides home shoppers with a personalized estimate of what they can afford based on income, credit profile and current mortgage rates. 

The legislative push to build more homes

While mortgage rates are improving the short-term math for buyers, the core of the housing affordability problem lies in a structural shortage of homes that has been 20 years in the making. Zillow estimates the U.S. housing market is 4.7 million homes underbuilt. Durable progress relies in large part on building more homes.

That’s why Zillow supports legislative efforts such as the bipartisan Housing for the 21st Century Act passed by the U.S. House of Representatives this February. The bill includes practical steps to expand supply, including encouraging zoning flexibility and faster approvals, reforming rules for manufactured and modular housing, and reducing unnecessary reviews. The Senate’s ROAD to Housing Act, which passed the Senate Banking Committee last year, is another strong example of legislation that would encourage more supply. Similar actions can be made at the state and local levels to make it easier for more homes to be built, including more flexible zoning and streamlined permitting.  

Rate relief can expand buying power quickly and help families get into homes, and policy efforts that address the housing shortage can ensure this progress continues. Resolving our country’s supply shortage won’t happen overnight, but it is crucial work to continue the momentum and ensure lasting change that benefits generations to come.