When we talk about the American Dream, owning a home has always been a central pillar. But in today's reality, that dream is getting harder and harder to reach. According to Investopedia’s latest Home Affordability Index, buying a home is becoming even less affordable—even though prices have dipped slightly—thanks in large part to rising mortgage rates.
Take, for example, Emily and Jason, a young middle-class couple living in Austin. Together, they earn around $90,000 a year and have been eyeing a modest three-bedroom house since last year, priced at about $370,000. Back then, they thought 2025 would be the year they finally move in. But after redoing their math, they realized their monthly mortgage payments would now be noticeably higher, forcing them to reconsider their timeline.
In May 2025, the median home price in the U.S. was $367,969, a slight dip from April’s $369,711. But mortgage rates went up by eight basis points, which pushed monthly payments higher. The median monthly housing cost—including principal, interest, property taxes, and insurance—rose to $2,414, up $18 from the previous month.
Meanwhile, wages just aren’t keeping up. To keep housing costs at or below the federal affordability benchmark of 30% of income, a household would now need to earn $8,046 per month. In April, that figure was $7,936. That means in just one month, families would need to earn an extra $110 just to stay within the same level of affordability. In reality, the median household income is still around $6,947 a month, which leaves a gap of $1,099—money that could otherwise go toward food, transportation, or long-term savings goals like college funds or retirement.
This shortfall is known as the housing affordability gap, and it changes over time as home prices, interest rates, and income shift. Since June 2023, the gap has averaged about $1,152. The smallest gap in recent memory came in September 2024, when interest rates briefly dropped, bringing the number down to $620. But that relief didn’t last long.
Consider someone like Matilda, a single mother in Denver who works as a social worker and earns about $5,800 a month. Under current market conditions, her housing costs would likely eat up more than 35% of her income—well above the 30% line. That makes it incredibly hard for her to save or invest in her daughter’s future. For Matilda, a home isn't a wealth-building asset—it’s a financial strain.
By federal standards, anyone spending more than 30% of their income on housing is considered “housing cost-burdened.” Today, Americans are spending an average of 34.8% of their income on housing, a number that reflects not only higher prices and rates, but also a growing financial pressure on everyday people.
This pressure is reshaping how people think about homeownership. Jonathan, a software engineer in Boston making $110,000 a year, has opted to keep renting. Even with his solid income, high local prices and rising mortgage rates make owning a home feel like a poor financial decision. Instead, he’s investing in the stock market and professional development. “Owning a house isn’t the benchmark of success anymore,” he says. “I care more about flexibility and peace of mind.”
Jonathan’s mindset isn’t unique. Nationally, the average age of first-time homebuyers is rising, and their overall share of the market is shrinking. While the government offers assistance programs for first-time buyers, these often do little to counteract the effects of high rates and sluggish wage growth.
So what’s the fix? Experts agree there’s no single solution. It’s going to take a combination of policy changes: reducing construction costs, expanding land use in urban zones, improving transportation infrastructure to make outer suburbs more viable, and possibly even rethinking the mortgage lending system. On a personal level, would-be buyers need to budget wisely, save aggressively—and perhaps even redefine what it means to live comfortably.
Ultimately, what we’re seeing isn’t just a shift in economic numbers. It’s a change in lifestyle, a reevaluation of priorities, and a recalibration of the American Dream itself. For many, a house with four walls is no longer a symbol of security. Instead, it may represent a fragile financial balancing act. And maybe, just maybe, what truly defines a home today is less about ownership—and more about stability.