NAR Affordability Index Hits 15-Year Low Despite Rate Stabilization

The National Association of Realtors' Housing Affordability Index fell to 87.3 in January 2026, its lowest reading since March 2011 and well below the 100 threshold that indicates a median-income household can afford a median-priced home. The reading reflects a persistent mismatch between home price appreciation, which has averaged 6.1% annually since 2019, and household income growth, which has averaged just 3.4% over the same period.

The affordability crisis is not uniform across the country. Markets in the Midwest — Columbus, Indianapolis, Kansas City — remain relatively accessible, with affordability index scores above 110. But in coastal metros and many Sun Belt cities, the index has collapsed. The San Jose metropolitan area now has an index score of 42, meaning the median household earns less than half of what would be needed to qualify for a mortgage on a median-priced home.

First-time buyers are bearing the brunt of the affordability squeeze. Repeat buyers typically bring substantial equity from their prior home, which offsets higher prices and rates. First-timers, by contrast, must accumulate down payments from scratch while also managing student debt, rising rent costs, and inflation-eroded savings. The National Association of Realtors estimates that first-time buyers now represent just 28% of all home purchases, the lowest share on record.

Policy responses have been fragmented. Several states have introduced down payment assistance programs targeting first-generation buyers, but funding tends to be limited and competition for the grants is intense. At the federal level, proposals to expand FHA lending limits and expand the low-income housing tax credit have stalled in congressional negotiations despite bipartisan acknowledgment of the problem.

Some economists argue that the affordability index overstates the problem by using a traditional 20% down payment assumption. In practice, many buyers use FHA loans with 3.5% down or conventional loans with 5% down, which changes the income required to qualify. But even adjusting for lower down payments, the qualification bar remains out of reach for a growing share of working families.

The long-term solution, most housing economists agree, is sustained growth in housing supply — specifically the construction of entry-level and workforce housing units in job-rich metro areas. Until zoning reform, reduced construction costs, and expanded builder capacity bring new supply online at scale, the affordability gap will continue to widen regardless of what happens to interest rates.