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Zillow says it would take an 'unrealistic' mortgage rate decline to restore housing affordability
The average 30-year fixed mortgage rate would need to be 4.43% to make the median-priced U.S. home affordable for the median-income household, estimates Zillow.
Lance Lambert & Meghan Malas
October 14, 2025
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Zillow says it would take an 'unrealistic' mortgage rate decline to restore housing affordability
A recent Zillow analysis suggests it would take a mortgage rate drop of more than one percentage point—to 4.43%—for the median-income U.S. homebuyer to comfortably afford the median-priced U.S. home. And that assumes a 20% down payment, which many first-time buyers are unable to make.
Even more striking, in several high-cost coastal metros, not even a 0% mortgage rate would make the median-priced local home affordable for a household earning the local median income. This includes New York, Los Angeles, Miami, San Francisco, San Diego, and San Jose, where taxes, insurance, and maintenance on a median-priced home alone can often consume more than 10% of a median household’s income.
On the flip side, Zillow finds that mortgage rates are already low enough for median-income buyers in many Midwestern markets to afford the median-priced home in those areas.
Keep in mind, this is back-of-the-envelope math. The mortgage rate scenarios above assume all else is equal—and that lower rates don’t impact home prices.
Are we likely to see an average 30-year fixed mortgage rate of 4.43% anytime soon?
Zillow economists say that scenario is “unrealistic”—at least in the short term.
“Holding incomes, [U.S.] home prices and all other housing-related costs equal, mortgage rates would need to drop to 4.43% in order for a typical home to be affordable to a buyer making the median income, assuming they put 20% down. That kind of a rate decline is currently unrealistic.”
“If buyers are waiting for big drops in mortgage rates or [U.S. home] prices to help affordability, they’re in for a rude awakening. Just like falling rates, that kind of correction in house prices won’t happen without a serious slowdown in economic growth and income growth, and a rise in the unemployment rate.”
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