Key Points:

• Affordability jumped nearly 9 percent year over year in December, the 10th consecutive annual gain.
  
  
• Affordability improved on an annual basis in all 50 states and in 48 of the top 50 markets.
  
  
• Markets with inventory at, or above, pre-pandemic levels tend to have the strongest affordability gains.

Affordability ended 2025 on its strongest footing in nearly three years. In December, the First American Data & Analytics   Real House Price Index (RHPI) shows affordability improved nearly 9 percent compared with a year ago — the tenth straight month of year-over-year gains and the best level since 2022. Preliminary January data suggest that improvement has continued into early 2026. 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.

Last month, we examined the role inventory played at the national level in moderating price growth. This month, a closer look across individual markets reveals how strongly local supply conditions are shaping the pace of recovery.

“Affordability is improving across nearly the entire country, and it’s improving faster in markets where supply has surged the most.” 

Why is Housing Affordability Improving More Rapidly in Some Markets?

Local housing market dynamics are influencing the varying magnitudes of recovery in affordability. A useful way to understand the differences across markets is to compare supply levels today with what was typical just before the pandemic — specifically, the December 2018–2019 average. 

Relative to the 2018–2019 pre-pandemic norm, market-specific inventory levels vary widely. The supply of homes for sale in some markets remains materially lower than the pre-pandemic period, while supply in others markets are roughly back to pre-pandemic levels. Several markets — including some of the pandemic boom markets — now have meaningfully more inventory than they did before 2020. Across the top 50 markets, there is a clear positive relationship between where inventory stands relative to that pre-pandemic benchmark and the size of affordability gains. Affordability has improved the most in markets with inventory at, or above, pre-pandemic norms, while many markets with supply levels well below those norms still have positive, but more modest affordability gains. 

When inventory levels are higher relative to historical norms, sellers face more competition and less pricing power, slowing or even reversing price growth. That moderation, combined with rising income and lower mortgage rates than a year ago, directly boosts house-buying power. For example, in Austin, Texas inventory is roughly 50 percent above its pre-pandemic norm, nominal house prices are down 4 percent year over year, and affordability has improved by 12 percent. Tampa, Fla., where inventory is 21 percent above its pre-pandemic benchmark, and Dallas, Texas, at 13 percent above, show similar patterns.

On the other end of the spectrum are markets where inventory remains far below pre-pandemic norms. In Chicago, inventory is 52 percent below its pre-pandemic norm; in Philadelphia, it is 40 percent below. In those markets, affordability has still improved compared with a year ago, but nominal price growth has proven more resilient. Not every market fits neatly into one category, but the overall relationship is unmistakable: where supply is closer to — or above — pre-pandemic norms, price growth is cooler and affordability recovery is stronger.

Supply is the Housing Market’s Pressure Valve

Affordability is improving across nearly the entire country and it’s improving faster in markets where supply has surged the most. Where inventory rises — whether toward normal or significantly beyond it — price pressure eases and household income has a greater chance to catch up. 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.

Sources:

•    First American Data & Analytics
•    Freddie Mac
•    Census Bureau

December 2025 Real House Price Index Highlights

The First American Data & Analytics’ Real House Price Index (RHPI) showed that in December 2025:

• Real house prices decreased 0.6 percent between November 2025 and December 2025.
  
  
• Real house prices decreased 8.6 percent between December 2024 and December 2025.
  
  
• Consumer house-buying power, how much one can buy based on changes in income and mortgage rates, increased 0.8 percent between November 2025 and December 2025, and increased 10 percent year over year.
  
  
• Median household income has increased 4 percent since December 2024 and 59.4 percent since January 2015.
  
  
• Real house prices are 24.9 percent more expensive than in January 2000.
  
  
• Unadjusted house prices are now 64.8 percent above the housing boom peak in 2006, while real, house-buying power-adjusted house prices are 12.3 percent below their 2006 housing boom peak. 

December 2025 Real House Price State Highlights

• There were no states with a year-over-year increase in the RHPI.
  
  
• The five states with the greatest year-over-year decrease in the RHPI are: Florida (-14.1 percent), Nevada (-12.3 percent), Washington (-11.8 percent), Utah (-11.3 percent), and Georgia (-10.9 percent). 

December 2025 Real House Price Local Market Highlights

• Among the Core Based Statistical Areas (CBSAs) tracked by First American Data & Analytics, the markets with the greatest year-over-year increase in the RHPI are: Hartford, Conn. (+2.7 percent), and Cleveland (+0.4 percent).
  
  
• Among the Core Based Statistical Areas (CBSAs) tracked by First American Data & Analytics, the five markets with the greatest year-over-year decrease in the RHPI are: Miami (-19.3 percent), Atlanta (-16.7 percent), Seattle (-16.0 percent), Denver (-15.0 percent), and Pittsburgh (-15.0 percent).

Next Release

The next release of the First American Data & Analytics’ Real House Price Index will take place the week of March 23, 2026.

About the First American Data & Analytics’ Real House Price Index

The traditional perspective on house prices is fixated on the actual prices and the changes in those prices, which overlooks what matters to potential buyers - their purchasing power, or how much they can afford to buy. First American Data & Analytics’ proprietary Real House Price Index (RHPI) adjusts prices for purchasing power by considering how income levels and interest rates influence the amount one can borrow.

The RHPI uses a weighted repeat-sales house price index that measures the price movements of single-family residential properties by time and across geographies, adjusted for the influence of income and interest rate changes on consumer house-buying power. The index is set to equal 100 in January 2000. Changing incomes and interest rates either increase or decrease consumer house-buying power. When incomes rise and mortgage rates fall, consumer house-buying power increases, acting as a deflator of increases in the house price level. For example, if the house price index increases by three percent, but the combination of rising incomes and falling mortgage rates increase consumer buying power over the same period by two percent, then the Real House Price index only increases by 1 percent. The Real House Price Index reflects changes in house prices, but also accounts for changes in consumer house-buying power. 
 

Disclaimer

Opinions, estimates, forecasts and other views contained in this page are those of First American’s Chief Economist, do not necessarily represent the views of First American or its management, should not be construed as indicating First American’s business prospects or expected results, and are subject to change without notice. Although the First American Economics team attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. © 2025 by First American. Information from this page may be used with proper attribution.