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Key Takeaways
- A Zillow study showed that mortgage rates in many major U.S. cities would have to drop to about 4.43% nationally to make housing affordable.
- Not even a 0% mortgage rate would make housing affordable in New York, Los Angeles, Miami, San Francisco, San Diego, and San Jose, given the housing costs there.
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Some housing markets are so expensive that they would still be unaffordable even if rates plummeted. In other areas, a small decline in rates would be enough to make homeownership possible for many buyers.
A 2025 Zillow report found that mortgage rates nationwide would need to fall to 4.43% to make the typical home affordable for a median-income family. The average mortgage rate for a 30-year fixed-rate loan is 6.00%. The study assumed a 20% down payment and defined affordability as a monthly mortgage payment of no more than 30% of median household income.
Zillow expects home values to tick down about 2% in 2026, but that barely dents the 49% increase since 2019. And if rates and other factors held steady, home values would need to plummet 18% for the typical home to become affordable, a correction that’s extremely unlikely without a serious economic slowdown.
New York, Los Angeles, Miami, San Francisco, San Diego, and San Jose are so expensive that not even an interest-free mortgage would make the typical home affordable. In these metros, taxes, insurance, and maintenance alone can exceed 10% of the median income.
Boston and Seattle are also pricey, and borrowing costs would have to fall to below 1% to achieve affordability.
Across the Midwest and Inland South, a cluster of metros would remain affordable even if rates climbed above 6.7%. The list includes Pittsburgh, Birmingham, Detroit, Buffalo, Indianapolis, St. Louis, Memphis, Chicago, Cleveland, Louisville, and Oklahoma City.
For instance, home prices in Pittsburgh average a more manageable $228,571, well below the $357,275 average home value in the U.S. Buying a house there would still be attainable for most people even if rates jumped as high as 9%.
Home values in Birmingham, Alabama, average $131,872, which means that the average buyer could still afford a home even if rates hit about 7.6%. In Detroit, the average home value of $75,511 means a homebuyer can afford a mortgage rate of about 7.0%. Buffalo, Indianapolis, and St. Louis are also cities with home values low enough to remain affordable if rates went above 7%.
