US housing affordability remains in the doldrums

One of our most recently added datasets is a first-time homebuyer index published by the National Association of Realtors. This affordability indicator is calculated as the ratio of first-time buyers' median income to the required income to qualify for a housing loan.

As our chart shows, early 2022 was the inflection point that saw everything change. As the Federal Reserve scrambled to tighten policy to control post-pandemic inflation, higher rates fed through to more expensive mortgages. That made the "qualifying income" shoot higher - far outpacing the median incomes of Americans aiming to get on the housing ladder. (In March 2020, the qualifying income was USD 49,242; five years later, that figure had almost exactly doubled.)

Our chart stretches back to the late 1990s, when the "old normal" for Fed interest rates stood above 5% - in line with the peak of the post-pandemic hiking cycle. Even with those rate levels, a booming US economy and qualifying income requirements that surpassed median incomes, the first-time affordability index was about a third better than it is in 2025.

Our second chart aims to visualize how first-time buyers have always had a relatively tougher time than people already on the housing ladder, and how that affordability ratio has changed.

We've highlighted the golden era that roughly started in the early 2010s, when ultra-low interest rates combined with modest but steady income growth. For more than a decade (except for a gap in 2018 that ended with another round of quantitative easing) the qualifying income for first-time buyers was above their median income.

This chart also shows how since 2022, even many homeowners with capital to deploy as their next down payment are struggling to hit the qualifying income; the headline index has hovered around 100.

We conclude with a real-time look at the unlikely prospect of cheaper mortgages, courtesy of the futures market. The "higher-for-longer" narrative for Fed policy has returned, given tariff-driven uncertainty about when sticky inflation will ease.

As of the time of publication, futures markets think it's 95% likely that Fed Chair Jerome Powell will stand pat on June 18. In early April, at least one cut was seen as a near-certainty, and markets were giving a sizeable probability to a double-sized, 50 basis point cut.