Dream of homeownership still elusive for average family in PR.

Over the past six years, housing affordability on the island has deteriorated significantly, driven by a perfect storm of skyrocketing property values, stubborn mortgage rates and stagnant household incomes.

By THE STAR STAFF

The dream of homeownership is slipping further out of reach for the average Puerto Rican family.

Over the past six years, housing affordability on the island has deteriorated significantly, driven by a perfect storm of skyrocketing property values, stubborn mortgage rates and stagnant household incomes.

According to the latest Housing Affordability Index compiled by economic consulting firm Estudios Técnicos Inc. (ETI), the index closed the fourth quarter of 2025 at just 64%. While this represents a slight uptick from the 58% recorded in the third quarter of 2025, it sits drastically below the 99% threshold recorded in early 2019.

The index measures whether a family earning a median income can qualify for a mortgage on an average-priced home with a 20% down payment. A value of 100% means a family has exactly enough income to qualify; anything below that signifies severe financial barriers.

“The deterioration in housing affordability reflects the convergence of three forces: rising property prices, high mortgage rates, and insufficient growth in household income,” said economist Leslie Adames, director of the Economic Analysis and Policy Division at ETI. “This combination has progressively widened the gap between what a family with a median income has available to qualify for a mortgage and the prevailing market conditions.”

The math paints a stark picture for local families. With respect to new homes, the average price surged to $421,191 in 2025, a 7.1% increase from 2024. To qualify for this purchase, a household needs an annual income of $105,297. In the case of existing homes, the average price rose 4% to $223,155.

Puerto Rico’s current median household income stands at just $34,730 -- leaving a massive deficit for anyone attempting to enter the market.

While a brief dip in 30-year fixed mortgage rates -- dropping from 6.96% in January 2025 to 6.19% in December 2025 -- offered temporary relief and bumped the index up to 64%, that relief was short-lived. Recent data from May 2026 shows that interest rates have already bounced back up to 6.51%, driven by a steepening federal Treasury yield curve.

Despite the fact that local families are being priced out, Puerto Rico’s real estate transaction volume has shown surprising resilience. After bottoming out at 2,231 units sold in the first quarter of 2024, sales recovered moderately throughout 2025, closing the fourth quarter with 2,645 units sold.

This paradox points to what Adames calls a “bifurcation” of the island’s housing market.

“Demand is being sustained primarily by buyer segments less sensitive to the cost of financing -- including cash buyers and investors -- while affordability constraints continue to exclude a growing proportion of the working and middle-class population,” Adames said.

The outlook for the remainder of 2026 offers little comfort. Economists warn that housing affordability will face continued downward pressure if mortgage rates remain elevated.

Furthermore, external global pressures -- specifically inflation driven by rising energy prices linked to ongoing geopolitical conflicts in the Middle East -- threaten to squeeze household budgets even further, shrinking the pool of potential local homebuyers to historic lows.