The Affordability Massacre Nobody Saw Coming

Min 1

Cotality released its January 2026 housing market report on January 29th, revealing numbers that redefine the affordability crisis.

Only about half of U.S. metros remain affordable to median households when you include property taxes and insurance.

Markets where people can actually afford to buy have plummeted 40% in ten years—dropping from 354 affordable metros in 2014 to just 212 today.

Regions with high affordability nearly disappeared, shrinking from 41 markets a decade ago to just four now.

If you're an investor, this bifurcation creates the clearest opportunity in years. Half the markets are becoming unaffordable for average buyers, which means rental demand in those metros will stay strong indefinitely.

The other half offers entry points where properties still cash flow and appreciation potential remains intact.

Min 2

In many markets, escrow costs alone—property taxes and insurance combined—now consume over 40% of the monthly housing payment. That's before paying principal and interest on the actual mortgage.

Cotality's affordability index measures whether median households can afford median home prices when all costs are included.

Markets that scored high on affordability a decade ago now struggle to meet basic thresholds.

This isn't about mortgage rates or home prices alone. Property taxes climbed as assessed values rose. Insurance costs surged as carriers pulled out of risky markets or raised premiums dramatically.

These are structural changes to the cost of homeownership.

Here's the investor payoff: when escrow costs spike high enough to price out buyers, those families become permanent renters.

They can't save for down payments or qualify for mortgages when escrow pushes debt-to-income ratios above lending limits. Your rental properties serve a captive market with no viable alternative.

Min 3

A rental property generating positive cash flow in 2020 likely generates even stronger returns today because rents rose while your mortgage payment stayed fixed. Meanwhile, new buyers face dramatically higher total monthly costs due to escrow increases.

Consider a market where property taxes and insurance together rose from around 30% of the housing payment to over 40% in recent years. A renter who could have bought five years ago now finds that same property unaffordable even though mortgage rates dropped slightly.

Scale that across the 142 metros that shifted from affordable to unaffordable over the past decade. Millions of households that could have bought homes in 2014 are now locked out permanently. That represents sustained rental demand supporting property values and rates.

Min 4

Individual investors positioned in the remaining affordable markets have a narrow window before those metros also become unaffordable.

The 212 markets that still score as accessible won't all stay that way as property taxes and insurance costs continue rising.

Here's your edge: identify affordable metros where fundamentals suggest near-term appreciation—strong job growth, limited new construction, positive migration trends.

Buy rental properties while they still cash flow, then hold as those markets transition from affordable to unaffordable.

The strategy requires timing. Enter too early in weak markets that stay affordable because nobody wants to live there. Enter too late in strong markets that already became unaffordable.

The sweet spot is metros showing early signs of tightening but still scoring as affordable.

The risk? If insurance costs spike dramatically in your target market due to climate events or carrier exits, you could face cash flow pressure even with fixed mortgage costs.

Min 5

This affordability collapse creates sustained opportunity across both affordable and unaffordable markets.

In unaffordable metros, you serve permanent renters with no path to homeownership. In affordable metros, you capture appreciation as those markets transition toward unaffordability.

The escrow squeeze means your competitive advantage as a property owner compounds annually. You locked in your property tax basis and secured insurance when you purchased.

New buyers face current tax assessments and current insurance rates, both dramatically higher.

Cotality's report confirms rental demand isn't softening—it's intensifying as homeownership becomes structurally inaccessible for larger portions of the population.

Takeaway

Cotality's data shows 142 markets shifted from affordable to unaffordable over the past decade, with escrow costs driving much of the change.

This isn't temporary—it's a structural shift in who can access homeownership.

Translation: rental demand will remain strong across most major markets regardless of what happens to mortgage rates or home prices.

The escrow squeeze alone prices out enough potential buyers to sustain rental markets for years.

The investment strategy is straightforward. In unaffordable markets, buy rental properties targeting the growing population of permanent renters.

In remaining affordable markets, buy before they transition to unaffordable as property taxes and insurance inevitably rise.

Watch Cotality's affordability index quarterly. When a market shifts from affordable to unaffordable, that confirms your rental properties will face sustained demand. The fewer affordable alternatives exist, the stronger your position becomes.