If you’ve scrolled through real estate listings lately, you’ve probably had the same reaction as many others: How is anyone affording this? Home prices seem out of reach, and even modest houses come with steep monthly payments. But while it feels like homes have never been less affordable, the reasons behind this go deeper than just “high prices.” Understanding what’s really happening in the market can help you make smarter decisions—whether you’re buying, selling, or waiting it out.

1. The Perfect Storm: Prices, Rates, and Supply

The biggest reason homes feel unaffordable is the combination of three factors—high prices, high mortgage rates, and low inventory. During the pandemic, record-low interest rates fueled a buying frenzy that sent prices soaring. When rates later doubled, affordability dropped off a cliff.

Even though price growth has slowed in many areas, rates above 6% mean monthly payments are still significantly higher than they were just a few years ago. For example, a home that cost $400,000 with a 3% mortgage in 2020 could have the same monthly payment as a $300,000 home today at a 7% rate. It’s not just sticker shock—it’s math.

Adding to the issue, there simply aren’t enough homes for sale. Many homeowners are “locked in” to their low-rate mortgages and aren’t willing to sell and buy again at today’s higher rates. That keeps supply tight, driving competition and keeping prices stubbornly high.

Read more: 10 Factors That Affect Housing Affordability

2. Wages Haven’t Kept Up

While home values and construction costs skyrocketed, incomes didn’t. Over the last decade, home prices have far outpaced wage growth. Even as inflation pushed salaries slightly higher, it hasn’t been enough to close the affordability gap.

This mismatch means that even though some buyers technically qualify for a mortgage, they’re often uncomfortable with the financial stretch it requires. For many, it’s not just about qualifying—it’s about living comfortably without feeling “house poor.”

3. Building Isn’t Catching Up Fast Enough

New construction could help ease affordability, but it’s lagging behind population growth and household formation. Builders face higher costs for materials, labor shortages, and stricter zoning in many areas. As a result, much of the new housing being built is geared toward higher-income buyers, not the middle-income families who are struggling most.

Until construction meaningfully ramps up—particularly for entry-level and mid-priced homes—the supply crunch will likely persist.

4. So, What Can Buyers Do?

While the overall market feels discouraging, there are still ways to make it work. Some buyers are expanding their searches to smaller towns or suburban areas, where prices are lower. Others are considering “house hacking” (renting part of their property) or choosing adjustable-rate mortgages with lower initial payments.

Patience and strategy matter, too. Keeping an eye on rate trends, saving for a larger down payment, and staying pre-approved can put you in a stronger position when the right home appears.

Final Thoughts

Homes feel unaffordable because they are—by nearly every historical measure. But this moment in the housing market isn’t permanent. As rates stabilize, construction improves, and more homeowners decide to sell, affordability should gradually improve. For now, understanding the “why” behind the frustration helps you plan for the “when”—and make the most of your next move when conditions shift in your favor.