Financing a home used to be a staple of the American Dream, but much has changed since the pandemic. High interest rates, rising property values, and declining real income have made owning a slice of America harder than ever.

According to Creditnews Research, mortgage affordability today is the worst it has been since 1981 when mortgage rates hit a record high of 18.38%. But how can this be when current rates are less than half that?

The answer lies in a concept called mortgage burden.

For the average homebuyer, the mortgage burden is the ratio of mortgage payments to income. Creditnews calculates it by examining the buyer’s starting mortgage payment as a percentage of their inflation-adjusted annual income.

The higher the ratio, the less affordable it is to own a home.

Our research found that the average mortgage burden has more than doubled since the start of Covid and is significantly higher than at any point since the early 1980s. Mortgage costs have far outpaced real income growth, making it harder for the average American to finance a home and manage the monthly payments.

“The average American has seen their purchasing power decline rapidly since the pandemic, and nowhere is this more evident than housing. In terms of mortgage burden, the average house today is almost as unaffordable as it was in 1981 when mortgage rates were more than double what they are currently. To buy a home at current home prices and interest rates, the average American family would spend more than half their monthly income on mortgage payments alone. This far exceeds the 30% threshold recommended by the Department of Housing and Urban Development.”—Sam Bourgi, Senior Credit Analyst at Creditnews

Key takeaways

  • In terms of mortgage burden, an average-priced house in 2023 is almost as unaffordable as in 1981 when mortgage rates peaked at 18.39%. Using the same metric, an average house today is more than two times costlier than it was in 2020;
  • At current rates, the average household could spend more than 60% of its monthly income on mortgage payments, assuming a 10% down payment. Anything above 50% is considered a severe cost burden;
  • While house prices have moderated from last year’s highs, a typical household still needs 7.25 years’ worth of income to afford an average house. That’s the second-highest on record. By comparison, it took the average household 3.7 years to afford an average house in 1981;

Mortgage burden: 1981 vs 2023

The early 1980s was a difficult period for the U.S. economy.

The inflation hangover from the 1970s prompted then-Fed Chairman Paul Volcker to push interest rates to an unprecedented 19%. The prime lending rate used by banks spiked to 21.5%, which helped trigger multiple recessions between 1980-1982.

At those rates, financing a home was out of reach for many Americans. By 1981, mortgage rates peaked at a record high of 18.39%. At that level, the typical American household’s starting mortgage payment was $1,277 a month, and its mortgage burden was 5.7% of annual income. That’s the highest level ever recorded.

One year earlier, in 1980, the average mortgage rate was 13.74%, and the typical mortgage burden was 4.2%—still high by historical standards.

Volcker’s interest-rate shock of the early 1980s successfully brought inflation under control, prompting the Fed to normalize interest rates gradually over the next three decades.

As rates declined and home prices grew modestly, the average mortgage burden fell through the 1990s, 2000s, and even the 2010s following the subprime mortgage crisis.

In 2020, just before Covid, the mortgage burden stood at 2.4% of annual income. Then things took a turn for the worse.

After two years of zero interest rates, post-Covid inflation forced the Fed to reverse course on its monetary policy by raising interest rates 11 times in 17 months, beginning in March 2022.

By 2023, the average 30-year mortgage rate reached a two-decade high of 7.79%. And although the average home sale price declined from its peaks, it remains well above $500,000.

Meanwhile, starting mortgage payments for new homebuyers swelled to $3,568 a month from $1,676 before the pandemic, bringing the average mortgage burden to 5.2%the highest since 1981.

In other words, starting mortgage payments more than doubled between 2020-2023, while average household income grew just 4.1%.

At current rates, the average household could spend more than 60% of its monthly income on mortgage payments, assuming a 10% down payment. According to the U.S. Department of Housing and Urban Development, households are considered “cost-burdened” when they spend in excess of 30% of their monthly income on housing. Anything above 50% is considered a severe cost burden.

The decline in housing affordability isn’t limited to mortgage burden, either.

Creditnews also compared average household incomes to home prices to determine how many years of income the average American family needed to buy a house.

In 1981, the average household income was $22,392, and it took 3.7 years of income to afford the typical house. By 2023, the average household income stood at $70,784, and it took 7.25 years’ worth of income to afford the average home.

Mortgage affordability has broader implications

The lack of housing affordability has major ramifications for the real estate sector beyond first-time homebuyers.

For one, new homeowners who purchased homes before 2022 are locked into ultra-cheap mortgages as low as 3.3%. In fact, our research shows that two-thirds of homeowners have rates below 4%.

These owners don’t want to sell and be forced to buy a different property with today’s expensive mortgage rates. They’d rather sit and wait until mortgage rates come back down.

Researchers call this the “golden handcuffs” phenomenon—a scenario that leads to a frozen housing market with limited supply. In May 2023, housing inventory across the U.S. fell to just under 1.4 million houses, the lowest since record-keeping began. In January 2019, before the pandemic, the supply was 2.2 million houses.

Affordability challenges are also being felt in the construction industry, where the costs of materials, supplies, and labor have skyrocketed. According to the Census Bureau, housing starts declined by 11.3% to a 1.28 million annualized rate in August, the lowest since June 2020.

Research from Freddie Mac suggests the U.S. needs 3.8 million more houses to alleviate the housing shortage.


Average home: To calculate average home figures, Creditnews collected data from the Federal Reserve and estimated the average sales prices of houses sold in the United States from 1970 to 2023.

Mortgage burden: To estimate the mortgage burden rate, Creditnews first determined the starting mortgage payment for an average-priced home, assuming a 10% down payment and a 30-year loan term. Then, it derived a ratio of the average monthly mortgage payment to the average annual household income. Creditnews gathered data from the Census Bureau to obtain average household income, average home sales prices, and average 30-year mortgage rates for each reference year.

Years’ worth of income to buy a home: To calculate the time required to buy a home, Creditnews collected data from the Census Bureau to obtain the average household income and the average sale price of a U.S. home in each reference year. Income levels and home prices were then compared to determine how many years’ worth of income are needed to buy an average home.


  • Federal Reserve Bank of Atlanta. Wage Growth Tracker
  • Federal Reserve Bank of St. Louis. Average Sales Price of a House Sold for the United States
  • Federal Reserve Bank of St. Louis. Federal Funds Effective Rate
  • Freddie Mac. Primary Mortgage Market Survey
  • U.S. Department of Housing and Urban Development. Office of Policy Development and Research
  • U.S. Census Bureau. New Residential Construction

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