Affordability Is at a Four-Year High. Why Aren’t Buyers Acting?

The data released this week from NAR contains a number that should be generating a lot more conversation than it is.

The Housing Affordability Index hit 116.5 in January — its highest reading since March 2022. For context, that index measures whether the median household income is sufficient to qualify for a median-priced home at current mortgage rates. A reading above 100 means yes. At 116.5, the median household income is now about 16% above the qualifying threshold. That’s not a marginal improvement. That’s a meaningful, sustained shift in purchasing power driven by wages outpacing home price appreciation over the past several months.

And pending home sales fell 0.8% month over month. Again. NAR’s own chief economist said “improving affordability conditions have yet to induce more buying activity.”

Something isn’t adding up — and the explanation matters more than either data point on its own.

What Everyone’s Saying

The dominant narrative in real estate right now is that buyers are still waiting for rates to come down more before they’ll commit. The assumption embedded in most pipeline conversations, most marketing messaging, and most brokerage planning is that there’s a rate threshold — somewhere around 5.5% or 5.75% — at which suppressed demand will finally release and the market will unlock.

That assumption is doing a lot of work. It’s the reason agents are running patient pipelines. It’s the reason brokerages are forecasting Q2 on the back of Fed cut expectations. It’s the reason “just wait a little longer” has remained a viable strategy.

This week’s FOMC minutes made clear that the wait may be longer than expected. Some members of the committee raised the possibility of rate hikes if inflation doesn’t cooperate. The next cut is now priced in June at the earliest. Fannie Mae’s current forecast has 30-year fixed rates sitting at 6% through most of 2026 and into 2027. And mortgage rates, which track 10-year Treasury yields rather than the Fed funds rate directly, aren’t going to move dramatically on a single 25-basis-point cut anyway.

The rate unlock thesis is getting harder to hold.

What the Data Actually Shows

Here’s the more useful read of the current environment.

At 6% mortgage rates, with wages growing faster than home prices, the monthly affordability math already works for a significant portion of the buyer pool. The Affordability Index is telling us that. Inventory is up 3.4% year over year. Median home price appreciation has slowed to under 1% annually. The structural case for buying — for the buyers who are financially positioned to do so — is stronger than it’s been since before the rate shock of 2022.

What’s not improving is confidence. And that’s a different variable.

The macro environment over the past several months has been noisy in ways that hit people at a gut level regardless of their personal financial situation — and [this pattern of economic anxiety suppressing buyer behavior isn’t new]. Employment anxiety, tariff uncertainty, political volatility, a Fed that can’t seem to give clear signals. None of these things directly affect whether a specific buyer with a stable income, solid credit, and 20% down should buy a home. What’s changed is that the anxiety is now showing up even among buyers who are financially positioned to act — creating an ambient sense of instability that makes waiting feel rational even when the individual math says otherwise.

That’s the gap the Affordability Index is revealing: the conditions that make buying financially viable have improved. The conditions that make buyers feel psychologically safe enough to act have not kept pace.