Shopping for a home this summer means confronting a market that has grown measurably harder to afford every month since January.
The National Association of Realtors (NAR) tracks how much household income is needed each month to qualify for a mortgage on a median-priced single-family home.
That qualifying figure climbed from $93,552 in January to $109,152 by June, a $15,600 jump driven by rising home prices and stubborn mortgage rates.
Signed contracts to buy existing homes dropped 5.4% in June, the steepest monthly decline of the year, NAR showed.
Homebuilder confidence has not been this low for this long since 2012, a slump reshaping how the industry competes for shrinking buyer demand.
That competition is creating an opening in new construction that the resale side of the housing market has been unable to match.
NAR data shows the qualifying income bar keeps climbing
NAR’s Housing Affordability Index has declined for five consecutive months, retreating from a nearly four-year high of 116.5 at the start of 2026.
In June, the median single-family home cost $446,400, and qualifying for a mortgage on that price required $109,152 in annual household income.
NAR’s formula assumes the buyer makes a 20% down payment and borrows at NAR’s calculated effective fixed rate of 6.57% in June, including points and fees.
Five months earlier, the median price was $398,200, rates averaged 6.19%, and the income threshold sat $15,600 lower, the NAR index stated.
Year-over-year, the picture looks slightly more favorable because wage growth of 3.5%, Bureau of Labor Statistics data showed, outpaced the 1.8% year-over-year rise in home prices reported by NAR.
Dr. Lawrence Yun, Chief Economist at the National Association of Realtors, said in the June affordability release that existing home sales data that the monthly push-and-pull in sales figures reflects how acutely buyers react to even small changes in borrowing costs.
The back-and-forth in monthly home sales activity, driven by mild fluctuations in mortgage rates, shows how sensitive home buyers are to affordability conditions
The average 30-year fixed rate also fell from 6.82% a year ago to 6.49% in June, easing monthly costs somewhat for buyers who could still qualify.
Regionally, the Northeast saw the smallest improvement because home prices rose 3.9% while wage growth was only 3.2%, NAR’s regional data confirmed.
Builder confidence stayed below 40 for the longest stretch since 2012
Builder confidence fell two points to 34 in July, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index released this week.
Any reading below 50 indicates more builders view market conditions as poor rather than good, and the current figure sits well below that threshold.
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Readings have remained below the 40-point threshold for 15 consecutive months, the longest such stretch since 2012, the NAHB reported.
All three sub-indices declined in July, with current sales conditions at 37, future sales expectations at 43, and prospective buyer traffic sliding to just 23.
Elevated mortgage rates, costly land, rising material prices, and persistent skilled labor shortages are all dragging on the index, NAHB Chief Economist Robert Dietz indicated.
Builders respond with price cuts and financing incentives
In July, 37% of builders reduced home prices, up from 35% in June and 32% in May, a clear three-month acceleration, NAHB’s latest survey showed.
The average price cut held steady at 6%, and nearly two-thirds of builders reported offering sales incentives to keep transactions moving forward.
Incentive use has stayed above the 60% mark for 16 consecutive months, a sustained effort to make new homes accessible as the broader market struggles.
Builders offering rate buydowns or closing-cost credits can push a buyer’s monthly payment below what a comparable resale listing would cost at market rate.
Resale sellers rarely have the financial margin to match a builder’s closing-cost or rate buydown package in the current environment.
Those concessions, documented in NAHB’s July survey, can leave a new-construction listing with a lower effective monthly cost than a comparable resale home once builder buydowns and credits are priced in.
The new housing law is in effect, but supply relief remains years away
The bipartisan 21st Century ROAD to Housing Act became law on July 11 after President Trump declined to sign it within the 10-day constitutional deadline.
The legislation includes provisions for zoning reform, regulatory streamlining, expanded financing tools, and manufactured housing, all aimed at reducing long-standing barriers to building, the NAHB release showed.
Construction timelines, permitting changes, and production ramp-ups mean the law’s benefits will take years to reach buyers shopping in the current market cycle.
The timeline is significant given that the country is short an estimated 4.03 million homes, Realtor.com reported in its 2026 housing supply gap analysis.
Even under an optimistic scenario in which construction increases 50% above 2025 levels, closing the deficit would take about seven years, the Realtor.com report estimated.
Yun expects affordability to improve modestly once the summer buying season fades and sellers lose some of their negotiating leverage, NAR reported.
Related: Real estate giant updates mortgage rate, home price predictions
