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Homeownership Affordability Remains a Major Barrier

  //house-home.news-articles.net/content/2026/02/2 .. rship-affordability-remains-a-major-barrier.html
  Published in House and Home on Wednesday, February 25th 2026 at 15:12 GMT by Seeking Alpha
      Locales: California, Texas, Florida, UNITED STATES

The Persistent Headwind of Affordability

The most significant barrier to homeownership remains affordability. While rates have seen minor fluctuations, the average 30-year fixed mortgage rate currently hovers around 7.25% (as of February 20th, 2026), a substantial increase from the sub-3% rates enjoyed during the pandemic era. This jump has dramatically impacted purchasing power, effectively pricing out a large segment of potential homebuyers, particularly first-time buyers. Matthew Gardner, Chief Economist at Zillow, accurately predicted this impact two years ago, stating that rates would significantly dampen demand - a prediction that continues to hold true.

The consequences are visible in recent sales figures. Preliminary data for January 2026 indicates a continued year-over-year decline in home sales, approximately 16.2%, surpassing the 14.7% drop reported in early 2025. This deceleration isn't simply a seasonal dip; it reflects a sustained contraction in buyer activity. While price growth has slowed considerably - with the median home price increasing by only 1.1% year-over-year - it hasn't yet entered negative territory, a testament to the underlying supply constraints.

The Inventory Puzzle: A Slow Thaw

Despite the cooling demand, the lack of available homes remains a critical factor propping up prices. The inventory of homes for sale, while gradually increasing, is still well below historical averages. This scarcity is particularly acute in desirable locations and for entry-level properties. Realtor.com's Senior Economist, Lisa Marie Papp, emphasizes that while inventory has risen from its all-time lows, it's still insufficient to trigger a significant price correction. The current inventory levels represent approximately 3.5 months of supply, far short of the 6-month supply generally considered a balanced market.

Increased construction is intended to remedy this, but that avenue faces its own hurdles. While construction permits are up 8% compared to last year, labor shortages, particularly skilled tradespeople, and ongoing (though lessening) supply chain disruptions continue to limit the pace of building. Furthermore, rising material costs are impacting builder profit margins, potentially leading to higher prices for new homes.

Price Predictions: Divergent Forecasts

The question of whether home prices will fall remains a point of contention among economists. Mark Zandi, Chief Economist at Moody's Analytics, anticipates moderate price corrections in many markets, particularly those that experienced the most rapid appreciation during the pandemic. His models suggest a potential 5-10% decline in prices over the next 12-18 months. However, Zandi stresses that a full-blown crash is unlikely, citing strong underlying demand and limited foreclosures.

Zillow's Gardner remains more optimistic, arguing that the housing market possesses greater resilience than many believe. He suggests that prices will likely stabilize in most areas, with modest gains possible in select markets with strong economic fundamentals. Gardner points to continued population growth and a favorable demographic trend - millennials and Gen Z entering their prime homebuying years - as supporting factors.

Regional Variations & Emerging Trends

The national picture masks significant regional variations. Markets in the Sun Belt and the Southeast continue to experience relatively strong demand, while those in the Midwest and Northeast are seeing more pronounced slowdowns. Luxury homes are also showing greater resilience compared to more affordable segments.

Interestingly, the trend towards remote work is reshaping housing preferences. Demand for larger homes with dedicated office space remains elevated, while the appeal of urban centers is gradually returning as people seek a balance between remote work and in-person collaboration. We are also seeing a growing interest in smaller, more energy-efficient homes as buyers prioritize sustainability and affordability.

Looking Ahead: A Market in Flux

The US housing market in late February 2026 is undoubtedly in a state of transition. The path forward is uncertain, but a dramatic crash appears unlikely. The most probable scenario is a period of stabilization, with prices either remaining flat or experiencing modest corrections. Affordability will continue to be the key challenge, and inventory levels will be crucial in determining the direction of the market. Buyers and sellers alike need to carefully assess their individual circumstances and consult with real estate professionals to navigate this evolving landscape.