In this episode of the REconomy Podcast™, Chief Economist Mark Fleming and Deputy Chief Economist Odeta Kushi explore the state of housing affordability through the lens of history and even the NFL. They compare affordability levels today with those from the late 1970s and early 1980s, revealing why the “cheaper” homes of the past weren’t necessarily more affordable, and highlight the results of the 2025 Affordability Bowl, which ranks first-time home buyer affordability across NFL divisions.

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Listen to the REconomy Podcast™ Episode 125:

“Homes in the early 1980s looked cheaper, but once you adjust for 17 percent mortgage rates, they were actually less affordable than today.” – Odeta Kushi, Deputy Chief Economist

Transcript:

Odeta Kushi - Hello, and welcome to episode 125 of The REconomy Podcast, where we discuss economic issues that impact real estate, housing, and affordability. I’m Odeta Kushi, deputy chief economist at First American, and here with me is Mark Fleming, chief economist at First American. Hey Mark, what are you wearing there?

Mark Fleming - I’m wearing my Eagles jersey. I don’t know if you recognize the number—62. That’s Jason Kelce. And no, we’re not talking about Travis.

Odeta Kushi - Okay, well, I only know one Kelce because…

Mark Fleming - I knew it. You would only know one—his older brother, Jason, who happens to be an All-Pro center for the Eagles.

Odeta Kushi - I’ll take your word for it. The Kelce I know is the one who’s going to be married to my favorite singer, Taylor Swift. So nice of you to promote that upcoming wedding.

Mark Fleming - Goodness, that was not my intent.

Odeta Kushi - Well, awkwardly enough, I’m wearing my jersey too. Totally unplanned. For those just listening, we also have a YouTube version of this podcast, so you can see us in our full jersey glory. And I promise this ties into today’s episode. The theme is: Don’t Stop Believin’ in Affordability.

Mark Fleming - It’s like we planned this. And Odeta, you beat me to the ’80s reference this time—well done. Sounds like today’s episode will be, dare I say, a little optimistic?

Odeta Kushi - Thank you. And actually, “believe” is also a Bills pun, so maybe I’m cautiously optimistic.

Mark Fleming - I didn’t even realize I did that. But you didn’t earn the nickname Debbie Downturn for nothing.

Odeta Kushi - That’s right—it’s going to be a good-news, bad-news kind of episode. We’ll start with how we measure affordability, where it stands today, and finally, where it might be headed.

Mark Fleming - When people say, “Back in the day homes were so cheap,” they’re usually referring to the sticker price, or nominal price. But affordability isn’t just about price—it’s also about income and borrowing costs. That’s why we created the Real House Price Index, or RHPI. It adjusts nominal prices for income and interest rates to measure house-buying power.

Odeta Kushi - Exactly. Take this example: house prices today are 60 percent higher than at the housing boom peak in 2006. But once you adjust with RHPI, house-buying power is actually more than 8 percent lower than that peak. So affordability today is better than 2006, despite higher prices.

Mark Fleming - RHPI is our North Star for affordability. Normally, we track it back to 1990, but for today we extended it back to the mid-1970s. That way, we can compare today with the late ’70s and early ’80s.

Odeta Kushi - Those were key housing years. We found affordability in 2024 was low, but not as low as between 1979 and 1985, when mortgage rates ranged from 11 to 17 percent.

Mark Fleming - Those rates give me chills. Nothing spookier for a home buyer than a 17 percent mortgage rate.

Odeta Kushi - That gives me a Halloween costume idea—I’ll just go as the Fed chair. But yes, those days were scary.

Mark Fleming - Wait, wait… a chair? Never mind.

Odeta Kushi - We’re really on a roll this episode. We also “dollarized” the RHPI, which shows the cost of buying a home in the past, expressed in today’s buying power. For example, the 2024 median new-home sale price was about $420,000. But a 1981 home, once adjusted for incomes and rates, would translate to over $630,000 in today’s dollars.

Mark Fleming - Odeta, you’re being unusually vague—“about” $420,000? Don’t you want to be more precise?

Odeta Kushi - Since you asked, the Census Bureau reports the 2024 median sale price of a new home was $419,508. No cents on that number, though—you’ll have to blame the Census Bureau.

Mark Fleming - So, no cents—makes no sense!

Odeta Kushi - Exactly. The key takeaway is that while homes looked cheaper back then, they were actually less affordable once you factor in incomes and borrowing costs.

Mark Fleming - Right. In 1981, the nominal median home price was about $69,000. But with mortgage rates near 17 percent, monthly payments were crushing. Using our RHPI approach, that 1981 home was effectively worth well over $630,000 in today’s buying power. So yes, those “cheap” houses weren’t really cheaper.

Odeta Kushi - Exactly. Now, where do things stand today? According to our latest RHPI, national affordability improved just over 3 percent year over year in June. That’s the fifth straight month of improvement, thanks to moderating mortgage rates, slower price growth, and rising household incomes. Preliminary data for July and August suggest the trend continued, lifting affordability back to levels last seen in fall 2024—about 12 percent better than the October 2023 low.

Mark Fleming - That’s the “Don’t Stop Believing” good news. But I sense Debbie Downturn is about to make an appearance.

Odeta Kushi - Unfortunately, yes. The not-so-good news is that the RHPI is still more than 70 percent higher—meaning less affordable—than its pre-pandemic five-year average. Improving, yes, but still with a long way to go.

Mark Fleming - Maybe that pre-pandemic “average” wasn’t really average at all. Rates were historically low, boosting buying power and affordability.

Odeta Kushi - That’s true.

Mark Fleming - And national numbers hide a big geographic story. In June, 27 of the top 50 metros showed either declines or very modest price growth. San Francisco led with a nearly 6 percent year-over-year price drop, while Louisville saw a 7 percent gain.

Odeta Kushi - Affordability actually improved in 39 of those 50 markets on an annual basis. That’s the slow comeback we’re talking about. But, of course, that raises another question—isn’t this bad news for sellers?

Mark Fleming - Sort of. On one hand, sellers are facing softer pricing power. Prices are below their peaks in 42 of the top 50 markets, including a 13 percent drop in Austin and a 10 percent drop in San Francisco. On the other hand, pandemic-era equity remains largely intact. Austin’s prices surged 65 percent between early 2020 and mid-2022. San Francisco rose 31 percent over the same time. So, even with recent declines, most homeowners are still sitting on significant equity gains.

Odeta Kushi - And the regional differences really come down to inventory. In markets where active listings are building, sellers are cutting prices to compete. Combined with income growth, that boosts affordability. In markets where prices are still rising, income gains don’t always keep up, and affordability declines.

Now, let’s shift gears to affordability specifically for first-time home buyers. We use our First-Time Home Buyer Outlook Report for this analysis. Typically, first-time buyers are renters, so we measure renter affordability based on their income, the prevailing 30-year mortgage rate, and assuming a 5 percent down payment with one-third of their income going toward the mortgage. Then we compare that house-buying power to the share of homes for sale within that budget.

Mark Fleming - And our analysis allows us to see affordability across the entire income distribution, not just the median renter. We can look at the 25th percentile renter, the 75th percentile renter, and so on.

Odeta Kushi - Yes, but for simplicity, we’ll stick to the median renter. At a national level, that median renter could afford just 25 percent of homes for sale in Q2 2025. That’s an improvement from 20 percent in Q4 2024, but still very low.

Mark Fleming - Not great. And there are wide local differences. Memphis, Tennessee, was the most affordable market among the top 50 we track, with the median renter able to afford 38 percent of homes for sale. On the other end, Los Angeles was the least affordable—just 1 percent of homes were within reach.

Odeta Kushi - That’s a very tough market for first-time buyers. And since football season is here, we thought it would be fun to compare affordability across NFL divisions. I’m curious to see how your Eagles stack up against my Bills.

Mark Fleming - I can’t resist that challenge. Last year we did something similar with home prices and called it the “House Price Blitz.” This year, we ranked first-time buyer affordability by NFL division.

Odeta Kushi - So, which division came out on top? Drumroll, please… it was the AFC South. On average, the median renter there could afford about 25 percent of homes. Jacksonville led the pack, with 34 percent affordability, thanks to a median home price of about $344,000 and a median renter income close to $66,000. Indianapolis wasn’t far behind, with 30 percent affordability on a $311,000 median home price and a $56,000 median renter income.

Mark Fleming - In second place was the NFC North. Detroit helped boost the division’s numbers, where the median renter earns around $43,000 and can afford 30 percent of homes, given a $260,000 median home price. Chicago also contributed, with 29 percent affordability at a median renter income of $62,400 and a $350,000 median home price.

Odeta Kushi - And once again in last place—the NFC West. Just 7 percent affordability on average. In San Francisco, renters earning nearly $95,000 can only afford 4 percent of homes, with a median home price of $1.2 million. Los Angeles was even worse—just 1 percent affordability with a $63,000 median renter income and a nearly $1 million median home price.

Mark Fleming - All very interesting, Odeta. But you’re dodging and weaving like your great running back, James Cook, my real question. Which market is more affordable—Philadelphia or Buffalo?

Odeta Kushi - Okay, fine, I checked the data. In Philadelphia, the median renter can afford 27 percent of homes, compared with just 23 percent in Buffalo—even though home prices are higher in Philly. So, the Eagles edge out the Bills this time. But you know what, Mark? Let’s settle this once and for all in the Super Bowl.

Mark Fleming - Now that would be a matchup worth watching. Early days, but I’d welcome it. Both teams are off to a great start. So yes, I'm hopeful that I will see you and the Bills in the Super Bowl, and we'll have to wear these jerseys again.

Odeta Kushi - For our listeners, all the data we mentioned today—the First-Time Home Buyer Outlook and our NFL affordability analysis—is available at firstam.com/economics. Now, before we wrap, the big question: where is affordability headed?

Mark Fleming - That’s always the toughest question. Affordability depends on rates, incomes, and prices. Right now, mortgage rates are moderating, incomes are rising, and house price growth is slowing. If that continues, we’ll see slow, but steady improvement—think field goals instead of touchdowns.

Odeta Kushi - On that positive note, thank you for joining us for this episode of The REconomy Podcast™. If you have an economics-related question you’d like us to feature, email us at firstam.com/economics. And, if you can’t wait for the next episode, follow us on X. I’m @OdetaKushi, he’s @FlemingEcon. Until next time—go Bills!

Mark Fleming - Hey! Hey Wait! Fly Eagles fly on the road to victory! Of course!

Odeta Kushi - You had to get it in the there!

Thank you for listening, and we hope you enjoyed this episode of The REconomy Podcast™ from First American. We're pleased to offer you even more economic content at firstam.com/economics. This episode is copyright 2025 by First American Financial Corporation. All rights reserv