Affordability forecast indicates ‘small-wins year’ for housing 

A growing number of major U.S. markets are inching closer to a crucial metric used in gauging housing affordability, a new study suggests.

This year, the mortgage payment for a typical home is expected to be affordable — meaning it will cost 30% of the median household income at most — in 20 of the nation's 50 largest metro areas, with Chicago, Atlanta and Raleigh, North Carolina, joining the current list, according to a new Zillow report.

But down payments remain a key hurdle. Zillow's study assumed a 20% down payment, which would be around $71,800 for a typical home valued at $359,078.

What's driving the change: Homes haven't been considered affordable in as many major markets since mortgage rates began climbing in 2022. Slower home price growth, lower mortgage rates and rising income are contributing to this anticipated "nationwide improvement in affordability," the report suggests.

By the end of 2026, Zillow predicts that mortgage costs nationwide will require 31.8% of the median household income. Though still well above the pre-pandemic years of around 23%, the projected level represents a significant drop from the peak of 38.2% in October 2023.

These affordability improvements are what's needed at this point in the housing market's recovery, according to Zillow Senior Economist Kara Ng.

"This is what a small-wins year looks like for housing," Ng said in a news release accompanying the data. "Rising incomes, subdued price growth, and gradually easing mortgage rates would help buyers regain their footing while allowing homeowners to continue building wealth. These types of slow and steady affordability improvements are exactly what the housing market needs over the long-run."

Where will affordability improve most? The metros with the best affordability tend to be low-cost spots in the Midwest and the Inland South, Ng said. But affordability is returning fastest in places where builders were best able to respond to surges in demand amid pandemic-era price spikes.

"New inventory gives returning buyers options to move up into and smaller, more dense options help out first-time buyers," Ng said in an email to Real Estate News. "Since renting is an alternative to buying, home price growth tends to follow rent growth. The surge in multifamily rental building completions over the last three years is helping to cool down price growth as well."

While 20 major markets are expected to be at or below the 30% affordability threshold by the end of this year, another 14 are projected to be above 30% but under 35%.

Meanwhile, mortgage costs are expected to exceed 50% of the median household income in five major markets: New York, Los Angeles, San Francisco, San Diego and San Jose. Only one of the nation's 50 largest markets — Hartford, Connecticut — is expected to see worsening affordability in 2026.

Big drop expected in New Orleans: Zillow economists are anticipating a significant price change in New Orleans, with home values forecast to drop 4.5% in 2026 — more than any other major market. This would reduce monthly mortgage costs in the area by $104.

"Home values actually rose slightly in 2025, but competition is sluggish heading into 2026," Ng said of the New Orleans market. "Inventory is up 20% over last year and homes are slow to sell. Rising insurance costs also factor heavily into home values there, as they are an additional cost to buyers that lower their purchasing power."