Homeownership costs surge despite familiar mortgage rates

Home prices have outpaced income growth, resulting in larger mortgage payments and down payments that can be a substantial portion of a household’s annual earnings. “A 7% mortgage rate isn’t historically outrageous, but a 7% mortgage on today’s home prices is a completely different animal,” explained Corinna Rose, a financial planner at Bell Investment Advisors.

Comparing 1997, when mortgage rates were 7.18%, to the present reveals the extent of the shift. In 1997, the median home price was $129,000, with a median household income of $37,010, resulting in a monthly mortgage payment of $699, consuming 23% of monthly income. Today, with a median home price of $422,700 (as of September 2026) and a median household income of $87,460 (as of 2025), the monthly mortgage payment is $2,291, now accounting for 31% of monthly income.

This means today’s homebuyers are paying roughly $640 more per month on their mortgage compared to what buyers in 1997 would have paid if they spent the same proportion of their income. These calculations don’t include property taxes, insurance, or maintenance, which further increase the overall cost of homeownership.

Since 1997, home prices have more than tripled (a 228% increase), while median household income has risen by 136%, according to data from the National Association of Realtors and the U.S. Census Bureau. “Home prices have gotten way out of whack with incomes because home price growth has well exceeded wage growth over the last 10, 15 years,” noted Hannah Jones, a senior economic research analyst at Realtor.com.

The current affordability challenges are also linked to the historically low mortgage rates during the pandemic, which spurred buyer competition. As rates have climbed, home prices haven’t adjusted sufficiently to compensate.

Mortgage rates are influenced by the bond market, particularly 10-year U.S. Treasury bond yields. Inflation plays a key role in these yields, as investors demand higher returns to protect against diminished purchasing power. Fannie Mae anticipates the average 30-year fixed mortgage rate will remain at 7.5% through 2027.