Affordability continues to improve in 2026, with home-price growth flattening and mortgage rates nearing 6%.

Early January declines in rates helped push affordability to a four-year high, as the monthly principal and interest payment needed to purchase the average-priced home dropped 7%, or $164, year over year to $2,091, reducing the share of median household income required to 27.8%, according to ICE Mortgage Technology's latest market monitor report.

"Even small reductions toward 6% rates can significantly boost affordability, particularly for homeowners who could refinance into a lower rate and monthly payments," said Andy Walden, head of mortgage and housing market research at ICE, in a press release Monday. "That said, affordability remains structurally challenged, with home prices still elevated relative to incomes and meaningful differences emerging across regions and borrower segments."

The 30-year fixed rate mortgage hit 6.06% the second week of January, according to Freddie Mac, boosting the number of homeowners in the money to refinance by 20%, or nearly 5 million, the highest level since early 2022, ICE found. 

Nearly 1.3 million borrowers recently originated mortgages that carry rates between 6.875% and 6.99%, including more than 500,000 from 2025, which made it the most common rate band last year and the most sensitive to interest rate shifts in the low 6% range, the release said.

While affordability has improved, it still remains well above historical averages. The national home price-to-income ratio sits at 4.8:1, compared with the long-run average near 4:1. Household incomes would need to rise more than 15% to revert back to prepandemic ratios, assuming home prices stay flat, according to ICE.

Home prices have been relatively stable over the past few months and rose just 0.6% in 2025, marking the smallest calendar year growth in 14 years. Regionally, the Northeast and Midwest have provided consistency, while the South and West have experienced declines, ICE found.

But minimized price gains left many homeowners underwater last year. More than 1.1 million borrowers ended 2025 underwater, the most since early 2018, with negative equity prevalent among Federal Housing Administration and Department of Veterans Affairs loans originated in 2022 or later, the report showed. 

Borrower equity reached a four-year low in the fourth quarter of last year, as less than 45% of mortgage residential properties in the United States were considered equity-rich, according to a recent Attom report.

Several Southern markets have more than one in 10 mortgaged homes underwater as well, ICE found.

"Today's market is full of cross‑currents — borrowers responding quickly to rate shifts, affordability improving for some but not others, and pockets of rising credit stress," ICE's President Bob Hart said in the release.