Signs of Relief for Buyers
After years of being priced out, U.S. homebuyers may finally be gaining some leverage. Mortgage rates, which peaked near 8% in late 2023, have eased to about 6.5%. At the same time, home price growth has slowed or even declined in some markets, thanks to weakening demand and increased supply.
“For prospective buyers who have been waiting on the sidelines, the housing market is finally starting to listen,” wrote Mark Fleming, chief economist at First American, in an Aug. 29 analysis.
Affordability Edges Higher
First American’s Real House Price Index (RHPI)—which factors in both income and inflation—shows that housing affordability improved 3.1% year-over-year in June, marking the fifth straight annual gain.
Unlike traditional indexes such as Case-Shiller, which only track property values, the RHPI measures consumer buying power. By that metric, affordability has reached its best level since September 2024.
Still, affordability remains over 70% worse than the pre-pandemic average, underscoring how far the market has to go before ownership feels accessible again.
Markets Where Prices Are Cooling
Some metros are seeing notable price relief:
- Austin: Home prices have fallen 13% since their June 2022 peak.
- San Francisco: Prices are down 10% since April 2022.
- Over half of major U.S. metros: Prices either declined or grew less than 1% annually.
- 70% of markets: Income growth outpaced home-price appreciation.
“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.
The Bigger Picture: Progress, but Still Painful
Despite modest improvements, homeownership remains out of reach for many. A Redfin analysis found that the U.S. homeowner population stopped growing for the first time in nearly a decade. High mortgage rates, economic uncertainty, and delayed life milestones like marriage are all factors keeping would-be buyers on the sidelines.
As Redfin’s head of economics research Chen Zhao put it: “Rising home prices, high mortgage rates, and economic uncertainty have made it increasingly difficult to own a home.”
What It Will Take to Restore Affordability
Economists agree the process will be slow. For affordability to make a meaningful comeback, the market needs:
- Continued declines in mortgage rates
- Further slowing of home-price appreciation
- Sustained income growth
But Fleming cautions that this will take years, not months. And some experts argue that even a sharp drop in mortgage rates wouldn’t fully fix affordability in certain metros, where home prices are simply too high.
The Bottom Line
While the U.S. housing market remains tough, the tide is beginning to turn. Buyers now have slightly more breathing room, and the balance of power is no longer as tilted toward sellers as it was during the pandemic frenzy.
“It’s going to be a gradual and uneven process,” Fleming wrote. “But the momentum is turning.”