New data showed all 50 states saw affordability gains, but gaps remained stark
Affordability in the United States housing market ended 2025 in far better shape than it began, giving homebuyers the first sustained relief they have seen in years, according to new analysis from First American’s Real House Price Index.
The index showed that in December 2025, affordability improved nearly 9% year over year – the tenth straight month of annual gains and the strongest level since 2022.
“Affordability ended 2025 on its strongest footing in nearly three years,” First American chief economist Mark Fleming said.
“The improvement was broad-based, with all 50 states and 48 of the top 50 markets posting annual gains. While affordability remains below its pre-pandemic five-year average, the recent improvement is a welcome respite for home buyers.”
Supply reshaped where buyers gained the most
Fleming’s latest commentary echoed a theme mortgage professionals have seen for months: inventory, not exuberant demand, increasingly dictated which markets delivered the sharpest affordability gains.
“Affordability is improving across nearly the entire country and it’s improving faster in markets where supply has surged the most,” he said.
“Where inventory rises – whether toward normal or significantly beyond it – price pressure eases and household income has a greater chance to catch up.”
He pointed to Austin, Texas, where inventory sat roughly 50% above its pre‑pandemic norm, nominal prices fell 4% year over year, and affordability improved by 12%.
Tampa, where inventory stood 21% above its benchmark, and Dallas, 13% above, showed similar patterns.
At the other end were Chicago and Philadelphia, still 52% and 40% below pre‑pandemic inventory levels, with more modest affordability gains despite improvement.
A turn toward affordability, not a reset
First American’s December numbers lined up with broader industry signals that 2025 marked a turning point rather than a boom.
An earlier home price index of the firm found national prices nearly unchanged for the year, with annual appreciation slipping below 1% and income growth finally overtaking price gains.
At the same time,affordability in late 2025 highlighted expectations that paychecks would continue to grow faster than prices into 2026, even if mortgage rates only drifted down slowly.
What it meant for mortgage professionals
For lenders and originators, the message is less about a snap‑back and more about a slow, uneven reset. Fleming described supply as the market’s “pressure valve”: “If supply continues to expand or, as in some markets, remains elevated in 2026, nominal price growth should stay restrained, allowing affordability to continue its gradual recovery.”
Mortgage professionals entered 2026 facing a market where buyers finally have a bit more leverage in select metros, but where tight supply elsewhere and still‑elevated borrowing costs keep many would‑be borrowers on the sidelines.
The opportunity lies in understanding which local markets have moved back toward or above pre‑pandemic inventory levels, and helping experienced clients use that shift in balance to capture rare, incremental gains in affordability while they are available.
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