The share of homes that are affordable is growing across the country, due largely to lower mortgage interest rates and more homes listed for sale. In 12 markets, at least half of all homes for sale are considered affordable.
Finding a home that fits your needs while leaving money in your pocket to enjoy life can feel like an impossible journey at times. But real estate markets vary widely, and, thanks to the recent decline in mortgage interest rates, the share of affordable homes for sale in nearly all of the nation’s 50 largest metros is larger than it was last year — or even last month.
Ten metros saw double-digit growth in the share of affordable listings in September 2024 compared to a year earlier. And nearly all of the metros saw small gains in affordability compared to only a month earlier, according to a Zillow® analysis.
If buying a home is a priority for you and you’re considering moving, you might want to consider one of these markets.
What makes a home affordable?
The metros on Zillow’s list of most affordable places to live all have one thing in common: The cost of housing consumes less than 30% of a typical household’s budget — in some cases, a lot less.
The rankings are based on a Zillow analysis of metros across the country that takes into account the value of a typical home along with the median household income. Also considered is the monthly mortgage payment needed to buy a typical home if the buyer pays current interest rates and puts 20% down toward the purchase.
These factors combined produce a “mortgage-to-income ratio” — the share of your income that goes toward housing costs. Paying roughly a third of your income toward housing is generally considered affordable as it tends to mean that you have money left for other necessities, to pay down debt and save for the future.
Of course, determining what you can afford when shopping for a home can involve a number of considerations beyond your mortgage-to-income ratio. Read on for tips on determining your price range, and remember you can reach out to a lender if you have questions
The most affordable places to live
First, the big picture: Nationally, more than one in four (27%) active listings were affordable to the typical household in September 2024 — a drop of 12 percentage points from pre-pandemic levels. This is likely a reflection of the run-up in home prices over the past four years, higher interest rates for the better part of two years and the historically low number of homes for sale. Combined, they created an affordability crisis that continues to affect many aspiring buyers.
Still, the overall picture for buyers has improved from a year ago — and even a month ago. Nearly every city analyzed in September 2024 had gains in affordability, some large and some tiny.
Only two of the 50 metros analyzed had fewer affordable listings than last year, and two others had no change in affordability from a year ago. The rest all became more affordable. This is likely due to the drop in mortgage interest rates from their high of about 8% in May 2024, price cuts as we move into the traditionally slower fall selling season, and more competition among sellers (listings in the U.S. are up 22% compared to last year).
Markets where at least half of listings are affordable
In a dozen local markets, half or more of the homes for sale are considered affordable. In the case of Pittsburgh, nearly three in four listings are affordable.
10 metros with the biggest gains in affordable listings
Some of the markets that were among the nation’s hottest last year saw some of the largest gains in affordability.
Least affordable metros
California metros, along with a handful in the Northeast, remain among the nation’s most unaffordable, with fewer than 15% of listings considered affordable in September. They are:
Why does affordability change?
Several things affect affordability. Among the most common:
Changing interest rates. Interest rates change often, and when they do, they affect the amount you’ll pay every month and the amount you can afford to spend on a home. For example, if you borrowed $300,000 with a 30-year, fixed-rate mortgage at 6.5%, your monthly payment for principal and interest alone would be $1,517. If your interest rate dropped a quarter point to 6.25%, your payment will drop by $39 a month. If the rate is 6%, you’d save another $39 each month.
Home prices. Real estate is a seasonal business, and prices tend to be higher during the spring months, when sellers tend to list and buyers come out in droves. When the market favors buyers, home prices are not likely to rise as much, if at all, and you’re more likely to see price cuts on listed homes that haven’t sold quickly. In markets that favor sellers, price increases are more likely. To see what the picture looks like in markets that interest you, see Zillow’s Market Heat Index.
Size of down payment. The more you put down on a home purchase, the less you have to borrow, which cuts down on the interest you have to pay over the life of your home loan. The result is lower monthly payments.
Credit score. Lenders tend to offer their best mortgage interest rates to buyers who have high credit scores. Getting and maintaining a high credit score could help you save on interest charges. Learn more about how credit scores affect buying a house.
Personal finances. If you earn a good salary for the area where you live, and don’t have a lot of debts, you can afford to spend more on housing. Some locales have considerably lower home prices than other areas, but median household income in those areas may be too low for a typical family there to afford a home, even with the lower prices.
Ways to understand what you can afford
There are several ways to determine how much you can spend on a home so that you’re not spending more than a third of your income on housing. Here are three of the most common:
Track your BuyAbility
Zillow Home Loans’ BuyAbility℠ is one of several tools available through Zillow that can help you calculate a budget for a home. It gives you a current picture of how much you can afford to spend on a home by connecting your financial picture with the current mortgage marketplace, showing you how different interest rates impact your monthly mortgage payment and the amount you could spend on a home.
BuyAbility compares current mortgage rates as powered by Zillow Home Loans with the financial information you provide to give you a personalized estimate of your home buying budget. The insights show how much you may qualify for given your financial situation and your credit score.
Use the Affordability Calculator
The Affordability Calculator is another tool that helps you figure out what you can afford to spend on a home. You can keep it simple by entering your annual income, monthly debt expenses and how much you plan to put down toward the purchase. Or you can dive deeper by creating different scenarios to see how varying interest rates and loan terms change what you would pay each month.
Use a debt-to-income calculator
Zillow’s debt-to-income calculator takes into account your annual income and monthly debts such as student loans, credit card payments and the like to determine yourdebt-to-income ratio (DTI). The ratio represents the share of your gross monthly income that goes toward paying down debt every month. Lenders use the ratio to help measure your ability to manage monthly payments and repay a home loan.
Get pre-qualified and/or pre-approved and talk to a loan officer
Another way to get a more precise determination of what you can afford is to get pre-qualified and/or pre-approved by a lender. Pre-qualification generally involves a review of your creditworthiness to establish how much a lender might be willing to lend you to buy a home, while pre-approval involves a more detailed review of your finances and a preliminary commitment to lend you a certain amount of money to buy a home under certain conditions. A lender can guide you through the process and explain the options available. Together with a real estate agent, you should be able to focus your search so that you’re looking only at homes you can afford.