Wages Are Catching Up With Home Price Growth—So Why Don’t More Buyers Feel Empowered?

The housing market is finally sending buyers some encouraging signals, but not yet in a way that's likely to feel like broad relief for the middle class.

Wages are expected to grow 3.4% in 2026, according to WTW, a global advisory firm—outpacing projected home price growth by 1.2 percentage points. In hundreds of markets, that shift is already happening at scale, tilting the market toward affordability.

But what that doesn't capture is how far wages would have to go to return to pre-pandemic levels of affordability.

In 2025, the home price to income ratio—a measure of homebuying affordability—stood at roughly 4.9, down from the 2022 peak of 5.2, according to Realtor.com® senior economic research analyst Hannah Jones. It’s an improvement, but still well above the 2017 to 2019 norm of 4.1—and far above the 3.1 ratio that prevailed in 1990. 

To get back to that level of pre-pandemic baseline affordability would require incomes to rise roughly 20%, assuming home prices hold flat. To return to the 1990 ratio, incomes would have to jump 58%.

That’s why the current shift may not feel transformative for so many buyers. Yes, the market is improving—but from a deeply stretched place. For affordability to recover in a way that feels durable, progress will likely have to come from several directions at once.

Why better wages might not feel like real power

Part of the disconnect between home prices and wage growth is that employers and households think about income very differently.

Employers look at wages strictly as a labor market question: what it costs to fill a given role based on supply and demand in the labor market, Lori Wisper, managing director at WTW, tells Realtor.com.

Households, meanwhile, experience a much messier mix of signals: not just what they earn, but what that paycheck can still buy once inflation and essentials (like housing, food, energy, transportation, and health care) take their cut.

“The reason people confuse the two is because when you take the two together, it represents someone's buying power,” she explains—or, the real value of money, what you’re able to buy with the money you have.

Inflation has taken a meaningful chunk of that buying power in recent years. In 2021, inflation began a meteoric rise from under 2%—the Federal Reserve’s target rate—before hitting a high of 9.1% in June 2022.

Wisper says during this time, many employees started having conversations with their bosses about annual raises not keeping pace with inflation. But, she says, these conversations were missing the point.

“From a purist standpoint, employers only look at market job market data, which is the cost of labor,” she says. “Salary budgets don't change over time the way inflation does, and they certainly don't react as fast.”

In other words, employers generally aren’t setting pay based on how inflation is eating into a worker’s paycheck or by how quickly housing costs around their office are rising. Those pressures tend to affect salaries only when they start distorting the labor market itself, making it harder to recruit, hire, or keep people in a given role.

That kind of supply and demand logic can also explain why home prices are so far out of reach today. The country is currently short over 4 million homes, a supply gap that has helped keep prices high even as affordability worsened. 

So, it’s not just a wage issue. Yes, wage growth fell behind inflation for some years during the pandemic, but housing scarcity also pushed home prices further out of reach—taking another meaningful bite out of buying power.

Why this still isn’t 1990

That broader buying-power squeeze also helps explain why today’s wage-growth news still lands as only partial relief. A look back in time to 1990 shows how far buyers still are from anything like a true reset.

Back then, inflation oscillated between 3% and 5.4%, and mortgage rates sat between 9% and 10%—high by even today’s standards. But the median home price was just $96,800 and the median household income was $31,000, putting the home price to income ratio at 3.1, according to Realtor.com data.

That lower barrier to entry meant buyers were able to take on high borrowing costs and even inflation. Today’s market, on the other hand, is fundamentally different. 

“The 1990s offer a useful historical reference point, but not for the reason most people assume,” says Jones. “Today's buyers face the opposite problem, a high ratio and elevated rates, which compounds the affordability squeeze.”

Through that lens, the pressure on wages alone softens—which is good news given that it's highly unlikely for wages to jump 58%.

So what does this mean for today’s buyers?

It’s an important takeaway for buyers who still feel priced out. A broader reset will likely require several things to move at once: wages continuing to rise, mortgage rates easing, and home-price growth staying soft enough for buyers to regain ground.

One response is to keep watching and waiting for more of those signals to line up. Another is to act when the market gives you even a partial opening, and leverage whatever advantage is in your favor.

That could mean buying a fixer-upper with a lower list price and using added income from wage growth to fund the work needed to make it feel turnkey over time, just as Amanda and Vinny DeRise did.

After losing out on multiple move-in-ready homes to investors offering $100,000 over asking, the first-time buyers purchased a 140-year-old Victorian that their agent described as a “money pit," the DeRises told Realtor.com last month.

Since closing in 2024, the DeRises have used their savings, salaries, and a 401(k) loan to turn that money pit into their dream home. And by choosing to buy by age 32—even when neither the market nor the house was perfect—they gave themselves more time to build equity, a decision that could leave them with 22.5% more net worth by age 50 than if they had waited another decade for the market to turn more fully in their favor, according to research from Realtor.com.

Improvement is always a good thing, even if it doesn't tip the scales entirely in your favor. For buyers, the challenge is knowing when one improved metric may not be enough—and being ready when several finally are.