Housing Affordability: Can Middle Class Still Buy?

• Just 15.5% of homes listed in spring 2025 were affordable to a median-income buyer earning ~$75,000.

• Homes priced under $300,000 now make up a small fraction of inventory nationwide.

• Mortgage rates near 7% have nearly doubled monthly payments since 2021.

• Entry-level home construction has dropped 80% since the 1980s due to zoning and profit issues.

• Some midwestern cities still offer homes affordable to middle-income buyers.

The Myth of Plenty of Homes

You’ve probably heard it before: more homes are hitting the market, so things must be getting better. But if you’re a middle-income buyer, it may not feel that way. Despite more homes being for sale, housing affordability has only gotten worse. Why? Because most new listings are priced too high. Homes under $300,000—a range many would call “starter homes”—make up only a small part of today’s market. This is a big change.

Average buyers are caught between rising real estate prices, very high mortgage rates, and many other money problems. If it feels like owning a home is becoming a distant dream, you’re not alone.

What Homes Cost in 2025

Housing affordability means you can buy a home without spending too much money. Usually, this means spending no more than 30% of your total household income on home costs. This includes your mortgage, insurance, taxes, and upkeep. But in 2025, that standard is harder to meet, especially for the middle class.

High home prices and high mortgage rates have made monthly payments much too high for what people can usually afford. For many future homeowners earning around $80,000 a year, even a basic single-family home is now too costly.

The table below shows just how much harder it is to afford a home:

Middle-class families can buy less now. Their monthly costs are growing faster than their income. Wage stagnation, inflation, and debt mean today’s buyer gets much less than they could even five years ago.

What Has Changed From 2020 to 2025?

• Median home prices increased by nearly 40% in most city areas.

• Mortgage rates jumped from record lows (2.65%-3%) to around 7%.

• Less supply in affordable price ranges increased buyer competition.

Overall, we’ve entered a new time. The old ways of figuring out what homes people can afford don’t work anymore for most middle-income households.

Why More Homes Don’t Help Affordability

At first glance, more homes for sale seems like good news. More supply should cool the market, right? But that idea only works if the homes being added are at prices buyers can afford. In today’s market, that’s not happening.

New listings are rising, but they are mostly higher-priced properties. Homes priced above $500,000 are most of the new homes for sale. This leaves buyers who cannot afford much with little to choose from.

Starter Homes are Disappearing

The starter home is fast becoming something people don’t see anymore. Affordable homes under $300,000 made up roughly half the market in 2016. Now, they account for fewer than one in five listings in many city areas.

One main reason for this is investor activity. Over the past ten years, large investors—like hedge funds and real estate investment trusts (REITs)—have increasingly bought lower-cost single-family homes. Instead of reselling them, they turn these homes into rentals. This reduces the chances for people to own a home.

And then there’s the problem of “rate lock.”

Move-Up Problem: Homeowners Stay Put

Many homeowners got very low mortgage rates during the early pandemic years. Often, these rates were under 3%. They don’t want to give that up. Listing a home now means moving to a new 6%-7% mortgage, which is a hard financial change.

This situation, called “rate lock” or “move-up gridlock,” is creating a problem for people trying to move up to a bigger home. First-time buyers can’t move into starter homes if current owners never leave them. As a result, even basic homes in suburban or older neighborhoods are selling with strong competition.

How Interest Rates Are Making Things Harder for Buyers

The effect of interest rates on housing affordability is often not fully understood. While home prices get the news, it’s the mortgage rate that sets what you can actually pay each month. And rates have nearly tripled since 2021.

This change means a buyer who could get a $400,000 loan in 2021 might only get approved for $300,000 today. This assumes their income has not gone up much.

Monthly Cost Breakdown

Mortgage affordability is set not just by the principal and interest, but also by:

• Property taxes (higher in certain states like NJ or IL)

• Homeowners insurance

• Private Mortgage Insurance (PMI), if your down payment is less than 20%

• HOA fees in some developments

All told, a 7% interest rate on a $400,000 home could mean a monthly payment of up to $3,300 once everything is added. This prices out many people who would otherwise be ready to buy.

The Middle Class is Being Left Out

The middle class—a group of people who have always been key to the housing market—is facing a very bad situation. For the middle class, buying a home is no longer a normal step in life. Instead, it is more and more a luxury. It often needs two high incomes, family help, or moving to a different area.

According to Zillow, only 15.5% of homes listed in the spring of 2025 were affordable for buyers earning the U.S. median income of roughly $75,000. Compare that with over 50% just a decade ago (Zillow, 2025).

The reality is harsh:

• FHA and VA loan users are often outbid by cash offers.

• Investors offer above list price, getting around what typical buyers can do.

• Young and first-time buyers delay purchasing, making the gap between rich and poor bigger.

Simply put, the middle-income class is being priced out of not just luxury markets but also everyday suburbs.

Can More Building Solve the Problem?

The easy answer often suggested is “build more homes.” This sounds good on paper, but the reality is full of problems. Yes, builders are making more homes—but they’re not making the right kind for affordability.

Why Builders Avoid Affordable Homes

Several things stop builders from focusing on lower-cost housing:

• High material and labor costs make homes with bigger profits more attractive.

• Zoning laws in many cities stop high-density or multi-family building.

• NIMBYism (Not In My Backyard) from existing homeowners blocks affordable projects.

According to the Urban Institute, building of entry-level homes has fallen 80% since the 1980s (Urban Institute, 2023). Most new housing starts are for homes in the $500,000+ price range. These are far too costly for the middle class.

Even with big changes in rules, it will likely take ten years to build enough affordable homes again.

Affordable Regions Still Exist

Even in today’s tough times, not every city is unaffordable—yet. Some mid-sized cities still offer homes within reach for households earning around $80,000 per year. These areas often have slower local price increases and less investor activity.

Source: Realtor.com, 2025

If working from home or moving is possible for you, these areas could be your best chance to own a home for the long term.

Standard Fees Make Affordability Worse

One part of housing affordability often missed? The costs of buying or selling.

Real estate commissions—usually 5% to 6% of the purchase price—are a big problem. On a $400,000 sale, you could lose $20,000 to $24,000 in fees. And while the seller may “pay” these commissions, their cost is ultimately added to the home’s price or taken from the seller’s money.

In tight markets with smaller profits, cutting or getting rid of these fees has a bigger impact.

Smarter Commissions, More Savings

New kinds of real estate companies and flat-fee listing models are helping cut commission waste without giving up good service. For example:

By using methods that reduce costs and cut down on needless agent payments, buyers and sellers can keep more money or have a bit more to spend.

In a market where even $5,000 can make or break a deal, this kind of efficiency matters.

Our Approach to Affordability

We’re here to flip the script. When every dollar counts, your real estate partner needs to give you real savings, clear numbers, and actual solutions. Our pricing-first approach is made for middle-income buyers and sellers who are struggling against national affordability trends.

Here’s how we help:

• Low Commission Listings: List your home for 1%, not 2.5% to 3%.

• Buyer Rebates: Get rebate cash at closing in eligible states.

• Making the Most of Your Home’s Value: Tools that help people selling and buying at the same time get the most profit and put their money back into a new home well.

• Smart Tools: Use instant net sheets, compare offers, and plan for everyone.

5 Ways Middle-Income Buyers Can Still Compete

Being priced out isn’t the same as being powerless. There are proven ways to take back control of buying a home:

• Get the most from lender credits and buyer rebates. Look for lenders who offer deals or combine programs with local grants.

• Consider co-buying. Partner with a trusted family member or friend to make buying a home more possible. Just make sure legal safeguards are set up.

• Look at outlying or suburban markets. Cities 30–45 minutes outside desirable areas often have more flexible prices.

• Negotiate seller credits. In slower markets, you can ask for help with closing costs, repairs, or mortgage buy-downs.

• Time your purchase. Fewer buyers shop in Q4 and Q1, which may force sellers to consider lower offers.

The Market is Tough—but Not Hopeless

It’s no illusion—housing affordability has dropped a lot. The middle class is facing more and more problems in home buying. From too-high real estate prices to a mortgage market that punishes buyers, it can feel like the odds are stacked against you.

But not all hope is lost. Partner with clear, fee-conscious experts. Use tools to cut standard costs, shop smart, and seek out pockets of affordability others miss. In the new real estate market, smart plans are just as important as money.

This may be one of the hardest times in modern history for average families to buy a home—but it’s not impossible.

Citations

Freddie Mac. (2024). Weekly mortgage market survey.

National Association of Realtors. (2024). Existing-home sales and price trends. Retrieved from https://www.nar.realtor

Realtor.com. (2024). Housing affordability by metro. Data snapshot compiled for public reporting June 2024.

Urban Institute. (2023). Shortage of entry-level homes: Why we can’t build our way out overnight. Retrieved from https://www.urban.org

Zillow. (2024). Only 15.5% of homes listed in spring 2024 were affordable to median-income buyers.