Real Estate·HousingThe U.S.
housing market is ‘finally starting to listen’ to buyers plagued by high mortgage rates and prices, economist saysBy Sydney LakeBy Sydney LakeAssociate EditorSydney LakeAssociate EditorSydney Lake is an associate editor at Fortune, where she writes and edits news for the publication's global news desk.SEE FULL BIO High mortgage rates and prices sidelined buyers for years.Getty ImagesHousing affordability in the U.S.
has imved slightly in 2025 due to mortgage rates down and price growth flattening or declining in some , though conditions are still much more difficult than before the pandemic.
A First American analysis shows a 3.1% year-over-year gain in affordability. However, most Americans still find ownership challenging.
After years of affordability challenges for buyers in the U.S., the housing market is “finally starting to listen,” according to Fortune 500 financial services firm First American.
High mortgage rates and prices sidelined buyers for years, especially in the aftermath of the pandemic housing market that saw sub-3% mortgage rates and more affordable prices.
But ever since then, mortgage rates spiked, peaking at 8% in late 2023.
Now that mortgage rates are slightly lower during the past few months—currently hovering around 6.5%—some buyers have at least a little bit of breathing room.
Meanwhile, price growth is mostly flat or slightly declining due to decreasing demand and increasing supply, according to the National Association of Builders.
“For spective buyers who have been waiting on the sidelines, the housing market is finally starting to listen,” wrote chief economist Mark Fleming in an Aug. 29 First American post.
Fleming’s analysis is based on First American’s Real House Price Index (RHPI), which stands out because it accounts for inflation un other -price indexes.
That’s because “just other goods and services, the price of a house today is not directly comparable to the price of that same house 30 years ago,” according to First American.
While a glance at most other -price indexes would show a stark increase in prices, First American’s actually shows national housing affordability rose 3.1% year-over-year in June, marking the fifth consecutive month with an annual gain.
However, if one were to look at something the Case-Shiller Price Index, it would show prices are nearly 50% higher than they were five years ago.
The RHPI also differs from other pricing indexes because it measures consumer buying power over time (taking into account the impact of income and interest-rate changes over time), while other indices Case-Shiller track value changes over time.
Is housing really becoming more affordable?
There are some mising signs housing affordability is imving: mortgage rates are slightly declining, -price growth is slowing, and household incomes are somewhat increasing, according to First American.
That’s led housing affordability to the best point it’s been since September 2024, First American’s analysis shows. prices either declined or grew less than 1% annually in more than half of major U.S.
metros, and income outpaced -price appreciation in 70% of , according to First American.
Austin, Texas, saw the sharpest decline at 13% from its June 2022 peak and San Francisco at 10% down from its April 2022 peak.
“While sellers may feel the pinch of waning pricing power, slower price growth—paired with rising incomes—is finally giving buyers a much-needed edge,” Fleming wrote.
Still, housing affordability, as measured by RHPI, remains more than 70% higher (worse) than the pre-pandemic five-year average. Indeed, another analysis published by Redfin on Wednesday shows the U.S.
owner population actually stopped growing for the first time in nearly a decade because mortgage rates and prices still feel out of reach, even if they’re considered to be slightly imving.
“America’s owner population is no longer growing because rising prices, high mortgage rates and economic uncertainty have made it increasingly difficult to own a ,” wrote Chen Zhao, Redfin’s head of economics re.
“People are also getting married and starting families later, which means they’re buying s later—another factor that may be at play.” But even a slight rebound can still be considered “an encouraging sign” for potential buyers, Fleming wrote.
It’s going to be a more gradual and uneven leveling cess for the U.S.
housing market, Fleming wrote, “but the momentum is turning.” It’ll take more income growth, continued slowing of price appreciation, and a drop in mortgage rates.
Other economists have said the mortgage rate drop it would take to make housing feel affordable in the U.S.
again is “unrealistic,” and in some metros even a 0% mortgage rate wouldn’t fix housing affordability.
“While this cess will take time, ly years, the balance of power is no longer as one-sided as it was during the pandemic frenzy,” Fleming wrote. Fortune Global Forum returns Oct. 26–27, 2025 in Riyadh.
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