Home values are 25% above affordability norms, the worst it’s been in years, according to a new report from Zillow. That increase is forcing many buyers to reset their expectations, with the market reflecting those decisions. 

Nationally, the average monthly mortgage payment is now $1,850, 75.5% or $800 higher than it was a year ago. Even as home values dropped from their June peak, rising rates aren’t helping any affordability gains buyers had. 

Zillow senior economist Nicole Bauchaud said the next several years appear to be set up for affordability to be a major challenge for homebuyers. 

“Inventory remains tight, real income growth is dismal, mortgage rates show no signs of dropping, and there is plenty of pent-up demand ready to bid prices back up if they reach a level would-be buyers can once again afford,” Bauchaud said. “Filling the housing deficit continues to be the key to long-term affordability, but the recent slowdown in single-family construction is not a good sign that the market is getting closer to building enough to meet demand.”

According to Zillow, home values would have to fall 24.7% for mortgage affordability to return to the 22.8% norm, but while some markets are closer to that, many have seen deteriorating affordability with some at least 37% above where they need to be. 

Chicago’s typical home value is $311,696. Its median household income of $78,831 means the share of income needed to afford a typical mortgage is 24% compared to its 21.7% historical norm.