By mid-2025, affordability remains one of the most defining forces shaping the housing market, particularly in states where prices, property taxes, and borrowing costs intersect at levels out of reach for most households. In California, only 15 percent of residents could afford the median-priced single-family home, which now stands above $905,000. This marks a decline from 17 percent in the previous quarter and only a slight improvement from 14 percent a year earlier. Condos and townhomes, with a median price near $670,000, offered marginal relief, yet were attainable for just a quarter of the state’s buyers. In both cases, the minimum annual income required easily surpasses $170,000, underscoring just how far income growth has lagged behind property values.
The affordability crisis is not confined to California’s coastal cities. Across the country, data shows that in 78 percent of U.S. counties, median home expenses now exceed the affordability benchmark of 30 percent of household income, with many markets surpassing 33 percent. These figures highlight a structural imbalance between wages and housing costs that has intensified over the past three years as mortgage rates rose and inventory remained historically tight.
Some of the largest gaps are found in states not traditionally associated with extreme housing costs. In Montana, for example, a household earning $72,000—slightly above the state median—would struggle to purchase a home priced at $650,000. This disparity is a product of rapid in-migration from higher-priced states, which has pushed values upward faster than local income growth. Similar patterns are emerging in pockets of Idaho, Colorado, and Tennessee, where lifestyle appeal and work-from-home flexibility have fueled demand without a corresponding increase in supply.
Meanwhile, the “million-dollar starter home” is no longer an anomaly. More than 230 U.S. cities now have entry-level properties priced above $1 million, including not just luxury enclaves but also formerly affordable suburban communities. This shift has redefined the entry point for first-time buyers in many regions, pushing some toward smaller units, longer commutes, or co-ownership arrangements as workarounds to escalating costs.
The consequences extend beyond individual buyers. High housing costs are prompting population shifts as residents in expensive states relocate to more affordable regions. States such as Texas, Florida, and the Carolinas continue to see inbound migration, driven not only by lower housing prices but also by more favorable tax structures and business climates. For high-cost states, these outbound moves can erode the tax base and reshape labor markets, while receiving states must grapple with infrastructure and housing supply challenges of their own.
For real estate professionals, these dynamics create a dual opportunity: guiding buyers through complex affordability challenges in established markets while also helping them identify emerging destinations where their budgets stretch further. Understanding affordability metrics, regional wage growth, and the interplay between local supply and national migration patterns is becoming as critical as knowing property values or market days on hand.
The affordability landscape is a reminder that homebuying in 2025 is not solely about finding a property—it’s about navigating an evolving national housing puzzle with creativity, precision, and an eye on long-term stability.
