Mortgage rates fell to a two-year low in September, opening up more possibilities for home buyers. A middle-income household would have been able to afford just 27.3% of homes for sale — and yet, this is still the highest share since February 2023. 

However, the sharp reversal for mortgage rates in the weeks since have likely pushed many prospective home buyers back to the sidelines. 

Affordability remains the top challenge for home buyers, and volatile mortgage rates are making a big impact on what home shoppers can afford. In May, when mortgage rates averaged 7.06%, a household making the median U.S. income could have comfortably afforded 22.7% of homes listed for sale across the country. About 75,000 additional homes on the market were affordable to a median-income household in September, when mortgage rates fell to an average of 6.18%.

October market trends

In October, the share of listings affordable for a middle-income household was greater than a year earlier in all of the nation’s 50 largest metro areas. In 12 markets, more than half of homes listed for sale in October were affordable, led by Pittsburgh (72.1%), St. Louis (64.2%), Buffalo (63.7%) and Detroit (61.5%). 

Many markets with the greatest gains from last year in the share of listings affordable to a middle-income household are in the Sun Belt. Austin (+13.2 percentage points) has seen the biggest increase, followed by Raleigh (+12.4), San Antonio (+12.2), Phoenix (+12.1) and Minneapolis (+11.9). 

Large markets in California, along with a handful in the Northeast, are among the least affordable in the U.S. Less than 15% of listings in October were affordable to a middle-income household in Los Angeles (1.6%), San Diego (4.2%), San Jose (7.2%), Sacramento (10.5%), the New York City metro area (11.4%), Boston (11.6%), Riverside (12.6%) and San Francisco (14%).  These are markets where building restrictions have historically prevented new housing supply from keeping up with housing needs.

Buyers should expect more unpredictability ahead for mortgage rates. Zillow expects rates to move lower into next year, though expectations can quickly change with each economic data release. Whichever direction mortgage rates move, the path is likely to be bumpy.