A $30,302 surge in median-income buying power hasn’t translated to easier entry for first-time buyers, as cash offers and aging sellers reshape the market dynamics.
The typical U.S. household can now afford a median-priced home of $331,483—a $30,302 increase from a year ago and the strongest affordability reading since March 2022, per Zillow’s latest analysis. This jump stems from lower mortgage rates and modest income growth, expanding the affordable listing pool by 40.3% of the market, up from 34.8% a year earlier. Yet, this ostensibly positive shift masks a stark reality: first-time buyers are being systematically priced out, with their market share plunging to a historic low.
The Affordability Rebound: By the Numbers
The affordability gain translates to roughly 82,300 additional listings within reach for median earners compared to last year. Key drivers include a drop in average 30-year mortgage rates from 6.96% in January 2025 to 6.10% last month, reducing principal-and-interest payments by 8.4% year-over-year. High-cost metros saw the largest dollar increases in buying power: San Jose (+$73,996), San Francisco (+$56,115), and Washington, D.C. (+$48,881). However, the median-income household would still dedicate 32.3% of its earnings to a typical mortgage payment—well above the 30% threshold for “affordable” housing.
Why First-Time Buyers Are Still Left Behind
Despite the broader affordability improvement, first-time homebuyers are facing their worst market in decades. Data from the National Association of Realtors shows they accounted for just 21% of purchases in the year through June 2025, far below the long-run average of 38% since 1981. The median age of a first-time buyer has hit a record 40 years. Jessica Lautz, NAR’s deputy chief economist, emphasized: “The historically low share of first-time buyers underscores the real-world consequences of a housing market starved for affordable inventory. Unfolding in the housing market is a tale of two cities,” noting that repeat buyers with existing equity are far better positioned.
Compounding the issue, all-cash purchases surged to an all-time high of 26% of sales over the past year. Cash offers decisively outcompete mortgage-dependent first-time buyers, especially in competitive markets. This trend heavily favors older, equity-rich households who can sell a previous home and buy without financing.
The Two-Tier Market: Cash vs. Mortgage, Old vs. Young
The divide is structural. For buyers with typical earnings and a mortgage, the housing landscape has modestly improved—but only if they can navigate a market where nearly one in four purchases is cash. Meanwhile, sellers over 70 are accepting approximately $20,270 less than younger sellers on average, according to a study by the Center for Retirement Research at Boston College. Sellers aged 80 and above receive about 5% less for homes held roughly 11 years, reflecting urgency or reduced negotiating power among older cohorts. This could marginally benefit buyers, but the advantage is often captured byrepeat movers, not first-timers.
Metros like Houston, Phoenix, Dallas, Miami, and Atlanta have added thousands of listings affordable to median earners, as noted by Zillow. Yet, even with more inventory, the competition from cash-rich buyers and the sheer lack of starter homes (sub-$300,000 properties) continues to marginalize first-time purchasers.
Forward Outlook: Rates, Inventory, and Investor Implications
Zillow projects mortgage rates will drift lower through 2026, potentially expanding buying power further and supporting a busier spring selling season. The company also forecasts a 4% rise in existing-home sales for 2026 versus 2025. For investors, the bifurcated market presents clear opportunities: build-to-rent developments targeting rent-burdened households, or acquisitions of mid-tier homes in Sun Belt metros where affordability gains are concentrated. However, the persistent affordability gap for entry-level buyers signals long-term headwinds for the traditional starter-home segment.
The current dynamic—improving math for mortgage borrowers but a dominant cash-buyer advantage—reinforces a worrying trend: homeownership is increasingly becoming a wealth-preservation tool for older generations rather than a ladder for first-time buyers. The $30,000 buying power boost is real, but its benefits are unevenly distributed, leaving the most vulnerable aspiring homeowners still on the outside looking in.
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