At the time, economists warned home buyers to get used to high mortgage rates. Today, mortgage rates are still nearly 7%. 

High mortgage rates have been just one facet of the housing affordability crisis in the U.S. Home prices are also historically high—up more than 53% since the onset of the pandemic. As a result, the number of first-time homebuyers is half the historical norm. 

In order for a typical home to be affordable to a buyer, mortgage rates would need to drop to 4.43%, Zillow economic analyst Anushna Prakash reported Tuesday. 

But “that kind of a rate decline is currently unrealistic,” she said. Meanwhile, not even a 0% interest rate would make a typical home affordable in New York, Los Angeles, Miami, San Francisco, San Diego, or San Jose, according to Zillow.

“It’s unlikely rates will drop to the mid-[4% range] anytime soon,” Arlington, Va.-based real estate agent Philippa Main told Fortune. “And even if they did, housing prices are still at historic highs.” With 11 years of experience, Main is also a licensed mortgage loan officer  

The factors affecting housing affordability in the U.S.

Prakash’s analysis holds income, home prices, and all other housing-related costs equal. This gets at the crux of the ongoing issues of the U.S. housing market: There are a variety of factors that affect housing affordability. And even if one were to change drastically, it wouldn’t result in a sudden affordability surge for hopeful home buyers. 

“While lower rates certainly help, they are just one piece of a far more complex puzzle that includes inventory shortages, wage stagnation, and rising insurance and tax costs,” James Schenck, CEO of PenFed Credit Union, told Fortune. “In other words, housing affordability is about more than just the Fed—it’s about the full ecosystem of access and equity.”

Wages haven’t kept up with home prices: Rents and house prices have been rising faster than incomes across most regions of the U.S., according to a 2024 report from the U.S. Department of the Treasury. In turn, Americans need to make more than six figures to afford a median-priced home, according to Realtor.com, but the average salary in the U.S. is only slightly more than half of that. 

“Even in markets that have seen a heavy correction and have lost 10% [or more] of value, homes are still selling for a higher percentage of people’s average income, making them feel more expensive than they did five years ago,” Main explained. 

She encourages her clients to look for a home that meets 85% to 90% of their criteria—say living further away or having one less bedroom—to have a shot at actually finding a home that’s affordable for them. That can be frustrating, though, considering that housing is so expensive “people don’t want to compromise because they feel they are committing so much more financially.”

Combating deteriorating housing affordability

Even if you can’t buy your dream home initially, there are other options to make it feel that way after it’s been yours for a while. More people are pouring home equity into renovations and staying in place instead of shelling out for a more expensive home at the start. Plus, being more modest from the outset can put you on a better path for eventually buying a new home.

“It’s easier to buy your dream home once you’ve built equity in another home you can sell, than it is to hold out for the perfect fit while still renting,” Main said, who also suggested looking at homes that have been on the market for longer. Sellers might be more willing to negotiate prices or give closing cost credits or mortgage rate buy downs, she added. 

There are also various mortgage options through smaller banks and credit unions, as well as special VA rates and adjustable-rate mortgages (ARM) that can be more affordable for some borrowers. 

Because credit unions are structured differently from for-profit mortgage lenders, they can offer lower loan rates and fees, Schenck explained.

“We aren’t waiting for the market to change,” he said. 

Main also said mortgage rates from local banks and credit unions can be more lucrative for some home buyers, but it’s important to know what’s the best fit financially for a home buyer. 

One of her clients recently got a lower interest rate through a local credit union, but it’s an ARM that will ultimately change to an unknown rate in the future. 

“It got them in the home they wanted at the monthly payment they can afford, and they plan to refinance into a traditional conventional loan later,” she said.