Home buying power 2026 is improving as mortgage rates ease and incomes edge higher, giving many households more room in their budgets.
A new analysis from Zillow shows that a median-income U.S. household can now afford a home priced at $331,483. That is $30,302 more than a year ago and the strongest affordability level since March 2022.
Lower borrowing costs have played a major role. Mortgage rates have fallen from an average of 6.96% in January 2025 to about 6.10% last month. At the same time, incomes have gradually increased, helping offset still-high home prices.
More Homes Within Reach
With that extra buying power, a median-income household can now afford roughly 82,300 more homes than it could one year ago.
Today, about 447,000 homes nationwide fall within reach of a median-income buyer. That represents 40.3% of all listings, up from 34.8% last year.
Inventory has also improved. Listings were up about 6% in January compared with a year earlier, adding more options for shoppers heading into the spring season.
Mortgage Payments Are Lower
The typical mortgage payment assuming a 20% down payment and excluding taxes and insurance is now 8.4% lower than a year ago.
While affordability remains tight, the numbers are moving in the right direction. A median-income household would still spend about 32.3% of its income on a typical mortgage payment. That is above historic comfort levels but better than recent years.
Zillow noted that an additional $30,000 in purchasing power can change what buyers are able to consider. It may allow access to a different neighborhood, a larger home, or a property that requires fewer trade-offs.
Big Gains in High-Cost Markets
The largest increases in home buying power 2026 are showing up in expensive metro areas.
- San Jose: +$74,000 in buying power
- San Francisco: +$56,115
- Washington, DC: +$48,881
- San Diego: +$46,506
- Boston: +$46,390
In these markets, even small declines in mortgage rates can significantly increase what buyers can afford because home prices are higher to begin with.
Where Buyers Gain the Most Inventory
In some Sun Belt and growth markets, falling home values have added to the affordability boost.
Houston leads the country with nearly 4,000 additional listings now affordable to median-income buyers compared with last year. Other markets seeing notable gains include:
- Phoenix: +3,434 homes
- Dallas: +3,267 homes
- Miami: +2,981 homes
- Atlanta: +2,279 homes
In these areas, price softening combined with lower rates has helped stretch buyer budgets further.
From the Low Point to Today
Buying power reached a recent low in October 2023, when mortgage rates averaged 7.62%. At that time, a median-income household could afford a home priced around $272,224.
Since then, gradual rate declines have restored much of the lost affordability. While mortgage rates are not back below 5% as they were in early 2022, today’s improvement marks steady progress.
Zillow expects mortgage rates to ease further through 2026, which could unlock even more buying power.
What This Means for 2026
Improved affordability and rising inventory could lead to a more active housing market this year. Zillow forecasts a 4% increase in existing home sales compared with 2025.
More buyers may feel ready to move forward if they see better loan terms and more listings in their price range.
Even so, affordability remains a challenge in many areas. Home prices are still elevated compared with pre-pandemic levels, and income growth has not fully caught up.
Bottom Line
Home buying power 2026 is at its highest level in nearly four years. Lower mortgage rates and steady income growth have expanded budgets and opened up more listings for median-income households.
While challenges remain, the shift gives buyers more options heading into the spring housing season and could support stronger market activity throughout the year. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.
