Affordability hit a three-year high, but tight inventory kept the recovery fragile
Housing affordability in the United States logged a ninth straight year-over-year improvement in November 2025, reaching its strongest level since mid‑2022, according to First American Data & Analytics’ latest Real House Price Index (RHPI).
The company estimated that “house-buying power” rose 9.8% over the year as wage gains and lower mortgage rates added roughly $36,600 to what a typical buyer could afford.
First American said affordability is still “more than 63 percent below its pre‑pandemic, five‑year average,” a gap the firm based on its internal index methodology.
Real house prices fell 8.5% year over year, while nominal house price growth slowed to just 0.5%, the weakest pace since 2012. Forty‑seven of 50 major metros posted affordability gains, underscoring what the firm called a “broad-based” improvement.
Wages and mortgage rates pulled in buyers’ favor
The labor market continued to provide critical support for housing affordability in November.
“Annual private-sector hourly wage growth increased 3.6 percent compared with a year earlier, boosting median household income by 3.5 percent year over year.” That income growth alone “increased house-buying power by roughly $13,100,” the firm said.
“Mortgage rates fueled another significant boost,” the analysis said. “Rates were 0.57 percentage points lower than a year earlier, lifting purchasing power by approximately $23,500. Combined, higher incomes and lower rates mean home buyers have about $36,600 more house-buying power compared with November 2024.”
“The forces that crushed affordability after the pandemic have meaningfully weakened,” the report said, pointing to house price growth that has fallen to near zero, mortgage rates that were no longer climbing, and incomes that continued to rise.
Inventory stayed the decisive wild card
During the 2021–2022 run of near‑20% annual price gains, inventory sat more than 50% below normal, the firm said, amplifying bidding wars. By late 2025, the gap versus 2015–2019 norms narrowed, but a renewed dip in listings “raised an important caution flag.”
“Gradual life event-driven market re-engagement should support more inventory and more sales transactions,” the report said.
“As long as inventory levels don’t deteriorate dramatically because more buyers than sellers enter the market, house price growth will remain in check, allowing affordability to continue to steadily improve.”
What it meant for lenders and originators
In a separate affordability outlook, First American chief economist Mark Fleming said household income is expected to rise faster than house prices in 2026, helping affordability keep inching higher even if rates only drift down slowly.
First American deputy chief economist Odeta Kushi previously said that buyers were relying more on income growth and moderating price appreciation than on a return to ultra‑low financing costs to restore affordability.
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