Wage Growth vs Home Prices 2026: The Great Affordability Reset Begins
For the first time since the aftermath of the 2008 financial crisis, wages will grow faster than home prices in 2026. Redfin predicts just 1% home price growth while wages continue at 3-4%. Here's what this historic shift means for buyers.
David Rodriguez
Senior Market Analyst • December 9, 2025 • 16 min read
📈 The Affordability Turning Point
Redfin's 2026 predictions mark a historic shift: for the first time since the financial crisis, homebuying will become more affordable because home prices will grow slower than wages. Combined with mortgage rates dipping to 6.3% (from 6.6% in 2025), monthly housing payments will grow slower than wages for the first time in years.
What this means: Your buying power is increasing. Each year you work and earn raises, you can afford more home. Compare lenders to see your current buying power.
Your 2026 Buying Power Calculator
Select your household income to see how much home you can afford in 2026 with improving affordability:
2026 Advantage: With 4% wage growth, your income of $80,000becomes $83,200 next year, while home prices only rise 1%. Your buying power increases by approximately $8,700 annually.
Why Wages Are Finally Outpacing Home Prices
This isn't happening by accident. Several forces are converging to create this affordability improvement:
📉 Home Price Growth Slowing
- • High rates curbing demand — fewer buyers competing
- • Weaker economy — job concerns reducing purchases
- • Sellers pulling back — low inventory but also low sales
- • Insurance costs — making some areas unaffordable
Result: Only 1% price growth predicted for 2026
📈 Wage Growth Continuing
- • Tight labor market — employers competing for workers
- • Minimum wage increases — lifting floor for all wages
- • Remote work leverage — workers have more options
- • Inflation adjustments — cost of living raises
Result: 3-4% wage growth expected to continue
📊 The Math: How Affordability Improves
| Year | Median Income | Median Home Price | Price-to-Income Ratio |
|---|---|---|---|
| 2025 | $80,000 | $420,000 | 5.25x |
| 2026 | $83,200 (+4%) | $424,200 (+1%) | 5.10x |
| 2027 | $86,528 (+4%) | $428,442 (+1%) | 4.95x |
| 2028 | $89,989 (+4%) | $432,726 (+1%) | 4.81x |
| 2030 | $97,268 (+4%/yr) | $441,381 (+1%/yr) | 4.54x |
Note: Historically, a price-to-income ratio of 3-4x is considered "affordable." We're currently at 5.25x. At this pace, it takes ~5 years to return to normal affordability.
Ready to Take Advantage of Improving Affordability?
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What the Affordability Reset Means for You
🏠 First-Time Buyers
Good news: 2026 could be your window. Less competition, improving affordability, and potentially lower rates create a more buyer-friendly market than 2021-2024.
- ✓ More time to find the right home (less bidding war pressure)
- ✓ Better negotiating power on price and terms
- ✓ Each year you save, your buying power increases
- ✓ First-time buyer programs still available (FHA, down payment assistance)
🔄 Move-Up Buyers
Mixed news: Your current home's value may grow slowly, but so will your target home. If you have a low rate, the "lock-in effect" remains a challenge.
- ✓ Target homes becoming relatively more affordable
- ✓ Less competition for move-up properties
- ⚠ May need to accept higher rate on new mortgage
- ⚠ Your current home may sell slower
💰 Investors
Opportunity: Slower price appreciation means better entry points. Focus on cash flow rather than appreciation.
- ✓ Less competition from other investors
- ✓ Better cap rates as prices stabilize
- ✓ Rental demand strong (many can't afford to buy)
- ⚠ Don't expect rapid appreciation like 2020-2022
⏳ Those Waiting on the Sidelines
Your patience is paying off: If you've been saving and waiting, 2026-2028 offers improving conditions.
- ✓ Each year of saving + wage growth = more buying power
- ✓ Rates trending down (6.3% predicted for 2026)
- ✓ Less FOMO pressure than peak market
- ✓ Time to find the right home without rushing
The 5-Year Path to Normal Affordability
Redfin estimates it will take about 5 years for housing to return to "normal." Here's the expected timeline:
The Turning Point
Wages begin outpacing home prices. Rates dip to 6.3%. Home sales rise 3%. Affordability starts improving but still challenging for many.
Momentum Builds
Second year of wages outpacing prices. More buyers re-enter market. Refinance activity remains strong. Price-to-income ratio improves to ~5.0x.
Noticeable Improvement
Three years of compounding improvement. First-time buyer rates increase. Some markets return to "normal" affordability. Price-to-income ~4.8x.
Approaching Normal
Four years of improvement. Many markets now affordable for median-income buyers. Homeownership rates begin recovering. Price-to-income ~4.5x.
"Semblance of Normal"
Five years of recovery complete. Price-to-income ratio approaches historical norms (~4x). Housing market more balanced. New normal established.
How to Take Advantage of the Affordability Reset
📊 If You're Ready to Buy Now
- 1Get pre-approved to know your exact budget
- 2Focus on affordable markets with job growth
- 3Negotiate — sellers have less leverage
- 4Plan to refinance if rates drop further
⏳ If You're Waiting 1-2 Years
- 1Maximize savings — every dollar increases buying power
- 2Boost credit score for better rates
- 3Research target markets and neighborhoods
- 4Track wage growth at your job — negotiate raises
Frequently Asked Questions
The Affordability Reset Is Here
For the first time since 2008, time is on buyers' side. Compare lenders, get pre-approved, and see exactly how much home you can afford today.
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David Rodriguez
Senior Market Analyst • NMLS #234567
David specializes in market analysis and refinancing strategies. With 12+ years of experience, he helps buyers understand market trends and time their purchases for maximum value.