During the pandemic, buyers enjoyed sub-3% mortgage rates, which ushered in a wave of first-time homeowners. But by late 2023, mortgage rates had peaked at 8%, and today still remain near 6.5% to 7%. That—in combination with home prices that are more than 50% higher than 2020—has locked out new home buyers from entering the market and current homeowners from selling. 

Zillow reported this week it would take mortgage rates dropping to about 4.43% to make an average home affordable for a typical buyer. But Zillow economic analyst Anushna Prakash said this was “unrealistic” considering the massive dip required to get there. 

But even if mortgage rates dropped to 0%, Prakash said, an average home would remain unaffordable in some major metro areas, according to Zillow. 

Those include: 

New YorkLos AngelesMiamiSan FranciscoSan DiegoSan Jose

That’s because high home prices “are the bigger hurdle,” Michelle Griffith, a luxury real-estate broker with Douglas Elliman based in New York City, told Fortune.

“The reality is that buying into the market especially in Manhattan or prime Brooklyn still requires a significant amount of cash upfront,” Griffith said. “Inventory is tight and competition is high, so the cost of the property itself is what keeps most buyers on the sidelines.”

Between May 2020 and May 2025, the Case-Shiller Home Price Index, which is widely used to measure U.S. residential real estate prices, jumped more than 51%. 

While mortgage rates certainly make monthly payments more expensive, Griffith said, affordability “is more about the overall price tag.” 

“Buyers care about rates, of course, but what really matters is having enough for the down payment and closing costs,” she added. “A small shift in rates doesn’t suddenly make that million-dollar apartment feel attainable.”

Another issue contributing to the housing crisis is a lack of lower-priced inventory. Salim Chraibi, founder and CEO of homebuilding company Bluenest Development, told Fortune he sees pre-approved and motivated buyers in Miami, but there just aren’t enough homes available in their price range. Chraibi’s company focuses on building homes for lower- and middle-income families.

“For sellers, many are holding onto homes because they don’t want to lose the lower interest rates they locked in years ago, which keeps inventory tight and the cycle going,” he said. “The biggest issue is inventory of the types of homes that are considered affordable for middle-income families.”

Dealing with sticker shock

When it comes to the U.S. market, tipping one scale doesn’t necessarily fix the housing affordability problem.

Even buyers who pay in all cash have to “contend with sticker shock,” Alexander Kalla, a realtor with Keller Williams Bay Area Estates in California, told Fortune. 

The median home price in San Jose has hovered consistently above $1.6 million, he said, which significantly strains most households before mortgage financing costs are even considered. So even if mortgage rates dropped to 0%, a median-priced home in San Francisco, San Jose, or anywhere else in the Bay Area would still require an extremely high down payment and monthly payments, he explained. 

While “many buyers here are extremely rate-sensitive, running numbers at every shift in the market,” Kalla said, “the main barrier is that house prices have massively outpaced local incomes since before rates rose.”

Rents and home 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. Americans now need to make more than six figures to afford a median-priced home, according to Realtor.com, but the average U.S. salary is only slightly more than half of that.

“Until we tackle prices, supply, and local wage growth, affordability will remain a challenge, no matter what happens with rates,” Kalla said.