Homebuyers’ Spending Power Plummets Since 2019: What Now?

Have you ever stood in front of a “For Sale” sign, imagining your life in that perfect house, only to realize the numbers just don’t add up? It’s a gut punch, isn’t it? For millions of Americans, the dream of homeownership has slipped further out of reach since 2019, with homebuyers’ purchasing power taking a serious hit. According to recent analyses, a typical household earning the national median income has seen its ability to afford a home drop by a staggering $27,000 in just six years. That’s not just a statistic—it’s a shift that’s reshaping lives, forcing tough choices, and widening the gap between those who own and those who can only dream.

Why Homebuyers Are Losing Ground

The housing market has always been a rollercoaster, but the past few years have felt like a particularly wild ride. Since 2019, the maximum affordable home price for a median-income household has plummeted from $325,000 to $298,000. That’s an 8.3% drop in purchasing power, even as wages have crept up by 16%. So, what’s driving this? It’s a perfect storm of soaring home prices, climbing mortgage rates, and wage growth that just can’t keep up.

The dream of homeownership is slipping away for many, as rising costs outpace income gains.

– Housing market analyst

The median home price in 2025 has hit $439,450, a far cry from what most earners can afford. Meanwhile, the share of homes within reach for median-income households has collapsed from 55.7% in 2019 to just 28% today. Imagine walking through a neighborhood where fewer than one in three homes is even remotely affordable—that’s the reality for many.

The Triple Threat: Prices, Rates, and Wages

Let’s break it down. First, home prices have skyrocketed. The median home price has climbed steadily, driven by low inventory and high demand. In 2019, you could find a decent home in many markets for under $300,000. Now? Good luck. In many metro areas, even starter homes are pushing past $400,000.

Second, mortgage rates have jumped. Back in 2019, a 4% rate was standard. In 2025, you’re looking at 6.74% on average. That might not sound like much, but on a $300,000 loan, it’s the difference between a monthly payment of $1,331 and $1,722—a $391 gap that eats into budgets fast.

Finally, wages haven’t kept pace. Sure, median incomes have risen 16% since 2019, but that’s peanuts compared to the 30%+ surge in home prices in many areas. For the average earner, the 30% rule—spending no more than 30% of gross income on housing—feels like a cruel joke.

Where It Hurts the Most

Not every city is feeling the pinch equally. Some metro areas have seen sharper declines in purchasing power than others. Here’s a look at the five hardest-hit markets, based on percentage drops since 2019:

• Milwaukee: Down 10.5%, or $33,000 less in buying power.
• Houston: Down 9.4%, or $31,000 less.
• Baltimore: Down 9.3%, or $37,000 less.
• New York: Down 9.3%, or $37,000 less.
• Kansas City, Missouri: Down 9.3%, or $31,000 less.

These numbers aren’t just data points—they represent families who can no longer afford their dream neighborhoods. I’ve seen friends in places like Baltimore give up on homeownership entirely, opting to rent indefinitely because the math just doesn’t work.

But it’s not all doom and gloom. A few markets have bucked the trend. Cleveland, for example, has seen a 4.4% increase in buying power, adding $11,000 to what median earners can afford. Why? More stable home prices and slightly better wage growth in some pockets. Still, these bright spots are rare.

The Widening Wealth Gap

Here’s where it gets really sobering. The housing market isn’t just making it harder to buy—it’s deepening inequality. Homeowners now hold 43 times the wealth of renters, up from 39 times in 2022. That gap is growing because those who already own homes benefit from rising equity, while renters are stuck on the sidelines.

The housing market is becoming a game for the wealthy, leaving first-time buyers in the dust.

– Real estate economist

First-time buyers, especially younger ones, are getting squeezed out. The share of first-time buyers has hit historic lows, and those who do manage to buy are often older, wealthier, or leaning on family help for down payments. It’s a market that increasingly favors the haves over the have-nots.

What’s Driving the Crisis?

Let’s dig deeper into the forces at play. Beyond the obvious culprits—prices, rates, and wages—there are structural issues making homeownership feel like climbing Everest without oxygen.

1. Low Inventory: There aren’t enough homes to go around. Builders haven’t kept up with demand, and many homeowners are staying put to keep their low-rate mortgages.
2. Investor Activity: Big investors are snapping up starter homes, turning them into rentals and driving up prices for regular buyers.
3. Policy Lag: Government programs to help first-time buyers haven’t scaled fast enough to match the crisis.

Perhaps the most frustrating part? The system seems rigged to reward those already in it. If you locked in a 3% mortgage in 2020, you’re sitting pretty. If you’re trying to buy now, you’re fighting an uphill battle.

Navigating the New Reality

So, what can you do if you’re a hopeful homebuyer in 2025? The situation is tough, but it’s not hopeless. Here are some practical steps to boost your chances:

• Shop in up-and-coming areas: Look for neighborhoods just outside hot markets where prices are lower but growth is likely.
• Consider smaller homes: A condo or townhouse might not be your dream home, but it’s a foot in the door.
• Boost your savings: Cut non-essential spending and funnel every extra dollar into your down payment fund.
• Explore assistance programs: Some states offer grants or low-rate loans for first-time buyers—research what’s available in your area.

In my experience, talking to a financial advisor can also make a big difference. They can help you crunch the numbers and find creative ways to stretch your budget.

These strategies aren’t a magic bullet, but they can help you navigate a market that feels stacked against you.

Looking Ahead: Is There Hope?

Will the housing market ever swing back in favor of buyers? It’s hard to say. Some experts predict that if interest rates stabilize or inventory increases, affordability could improve slightly. Others warn that without major policy changes—like more housing construction or better wage growth—the gap will keep widening.

Hope lies in persistence and smart planning, not in waiting for the market to fix itself.

– Financial planner

For now, the key is to stay proactive. Keep an eye on market trends, save aggressively, and don’t be afraid to think outside the box. Maybe that means renting a little longer while you build your savings or exploring markets you hadn’t considered before.

The housing market in 2025 is a tough beast, no question. But it’s not unbeatable. By understanding the forces at play—rising prices, higher rates, and sluggish wages—you can arm yourself with the knowledge to make smarter decisions. Whether you’re a first-time buyer or just dreaming of your next home, the path forward requires patience, creativity, and a bit of grit. So, what’s your next move?