The State of Affordability in 2025
Housing affordability has been the biggest obstacle for American buyers and investors. Mortgage rates soared to 8% in late 2023, home prices climbed nearly 50% higher than they were five years ago and incomes simply couldn’t keep up. Even today, affordability is still more than 70% worse than pre pandemic levels according to RHPI (First American’s Real House Price Index).
Affordability is no longer getting worse. In fact, the latest data shows it’s improving, but slowly. For investors, that means a market in a place where opportunities begin to surface as power dynamics change.
Where We’ve Been
During the pandemic, record low mortgage rates fueled a housing frenzy, driving demand and pushing prices sky-high. When rates changed course, peaking at 8% in 2023, many buyers were sidelined. Homeownership even stopped growing for the first time in nearly a decade according to Redfin.
This left the market at an impasse. Sellers still wanted top dollar, but buyers couldn’t afford the monthly payments. The gap has been painful, but it’s also created the conditions for the correction we’re now seeing.
Turning the Corner
The good news is that several key affordability metrics are finally trending in the right direction:
- Mortgage Rates: Now around 6.5% down from the 2023 highs.
- Home Prices: Growth has stalled nationally and some metros are seeing real declines. Austin is down 13% from and so is San Francisco which is down 10%.
- Incomes: Rising faster than home prices in roughly 70% of major markets.
First American’s RHPI shows affordability improved 3.1% YoY in June 2025, the fifth straight month of gains. The National Association of Realtors’ Affordability Index also ticked up to 94.4 which is its best reading since late 2024. Case-Shiller data confirms that price growth has slowed to just 2.1% annually much cooler than the double digit pace of recent years.
Why Affordability Is Still a Challenge
Despite these improvements, affordability remains historically strained. Harvard’s Joint Center for Housing Studies reports the median home price has reached $441,000 with a price-to-income ratio of 5.0, well above the traditional “affordable” benchmark of 3.0. Mortgage payments now average $2,570 per month.
Structural issues also persist. Supply shortages, restrictive zoning, and high construction costs continue to hold back progress. That’s why many experts caution that affordability will not “snap back” quickly, but instead, recover gradually over years.
Where Opportunities Emerge
For investors, the current environment isn’t just about challenges… It’s about positioning. With home price growth slowing, buyers and institutional investors gain more leverage at the negotiating table.
- Regional Openings: Markets like Austin, Phoenix, and Las Vegas, which overheated during the boom, are now correcting, creating entry points for those with patient capital.
- Multifamily Demand: With ownership still out of reach for many, rental demand remains robust, supporting strong fundamentals for multifamily and build to rent investments.
- Selective Timing: Slower appreciation means investors can be more disciplined in acquisitions, focusing on cash flow and long term value rather than relying on quick appreciation.
Policy and the Path Ahead
Policy makers are also taking note. The proposed ROAD to Housing Act of 2025 seeks to boost supply by cutting red tape, modernizing zoning rules, and supporting manufactured housing, steps that could gradually ease pressure in undersupplied markets.
Goldman Sachs projects that affordability may not normalize until around 2030 as it will take sustained income growth, modest price appreciation, and lower mortgage rates to restore balance.
Conclusion: A Long Road, But With Opportunities Ahead
The U.S. housing market isn’t “affordable” again just yet, but it is improving. Mortgage rates are down from their peak, incomes are rising, and prices are flattening. For investors, these shifts signal a market that’s beginning to turn, offering opportunities for those ready to act strategically.
Affordability’s recovery will be uneven and drawn out, but momentum is no longer one sided. And in real estate, moments of transition often create the best opportunities.
