Affordability stuck at multi-decade lows as average homeownership costs remain above lending guidelines
Home price growth in the US continued to cool in January, but affordability remains out of reach for many Americans, with housing costs still near record highs.
National home prices recorded a 4.1% annual gain in January 2025, a slight uptick from the 4% rate in December 2024, according to the latest S&P CoreLogic Case-Shiller Indices. The 10-City Composite rose 5.3% year over year, while the 20-City Composite increased 4.7%.
New York led all markets with a 7.7% annual gain, followed by Chicago at 7.5% and Boston at 6.6%. Tampa was the only metro to report a year-over-year decline, with prices down 1.5%.
"Home price growth continued to moderate in January, reflecting a clear two-part story across the past year," said Nicholas Godec, head of fixed income tradables and commodities at S&P Dow Jones Indices. "The National Composite Index posted a 4.1% annual gain, with the bulk of appreciation, 4.8%, occurring in the first half of the year. Prices declined 0.7% in the second half, as high mortgage rates and affordability constraints weighed on buyer demand and market activity."
On a monthly basis, the S&P national index edged up 0.1% before seasonal adjustment and 0.6% after adjustment. Both the 10- and 20-City Composite indices saw similar modest monthly gains.
Despite the cooling in price growth, housing remains a significant financial stretch for many Americans. Data from ATTOM shows that major expenses on a median-priced home now account for 32% of the average national wage, above the typical 28% cap preferred by lenders and virtually unchanged from the previous quarter.
“The current and historic affordability levels represent the latest measures of how home ownership remains a financial stretch for average workers around the nation,” ATTOM noted.
Even as the national median home price dipped slightly to $351,000 this quarter, near-7% mortgage rates continue to weigh heavily on affordability, preventing meaningful relief for buyers.
Read next: Fed tones down inflation fears, keeps mortgage market tight
"Rising mortgage rates throughout the year elevated monthly payment burdens, which, combined with already high home prices, pushed affordability to multi-decade lows in many regions," Godec said. "This likely contributed to subdued activity in the back half of the year, with both buyers and sellers exercising caution."
Inventory remains tight, particularly in legacy metro areas, where limited new construction has added to the supply strain. Still, long-term homeowners continue to benefit from price appreciation over time.
“Despite near-term softness, the S&P CoreLogic Case-Shiller Index remains historically elevated, and long-term homeowners have continued to build equity,” Godec added. “The current cycle reinforces the value of real estate as a long-duration asset, but also highlights how sensitive home prices are to changes in financing conditions and buyer affordability.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
