Housing Affordability Faces New Pressures Amid Rising Payments and Inventory Growth
The housing market continues to be shaped by a complex blend of economic forces, and unfortunately for many Americans, affordability is becoming even more elusive in 2025. Although home prices and mortgage rates are showing modest movement, the cost of owning a home continues to outpace income and inflation, creating significant challenges for first-time and repeat buyers alike.
Despite only a slight 1.34% increase in median home prices year-over-year, monthly principal and interest (P&I) payments surged 10.15% in April 2025. Even more alarming is the 3.46% jump from just the previous month. That means the average homeowner is now paying approximately $2,182 per month—a figure that’s growing faster than both inflation and wage gains.
This disparity has created an increasingly unaffordable environment, particularly for lower- and middle-income buyers. What’s most surprising is that this affordability squeeze is happening even though mortgage rates have slightly declined over the same period.
After climbing rapidly in recent years, mortgage rates have stabilized in the mid-6% range. While that’s a welcome reprieve from rapid rate hikes, the rates remain well above the historical lows many buyers came to expect during the pandemic era.
This rate stability, at relatively elevated levels, continues to keep affordability just out of reach for many households. However, the Federal Reserve has hinted at the possibility of one or two rate cuts by the end of 2025—provided inflation remains under control. If this happens, we may see some relief in borrowing costs, which could shift the affordability narrative in the latter half of the year.
While affordability worsens, inventory continues to climb across the U.S. housing market. Nationally, the number of existing home sales has dipped by 1.95% compared to last year, while new listings have surged nearly 10%. As a result, total housing inventory has jumped by 20.31% year-over-year.
This influx of homes on the market is giving buyers more leverage and more time to make decisions. Gone are the bidding wars and frantic showings of 2021 and 2022—today’s buyers are increasingly cautious, calculating, and patient.
The housing market doesn’t exist in a vacuum. Current events—ranging from U.S. economic shifts and employment concerns to international tensions and tariff wars—are influencing buyer and seller behavior alike.
In times of global uncertainty, people tend to take a “wait and see” approach, and that’s exactly what we’re seeing in today’s market. However, history shows that these uncertain moments can also create opportunities. With inventory up and competition down, buyers who are financially ready and focused on long-term value may find favorable deals in the months ahead.
There’s no question that housing affordability in 2025 is strained. Monthly mortgage payments are growing faster than inflation, mortgage rates remain historically high, and global factors are causing hesitation among both buyers and sellers.
But while the landscape is challenging, it’s not without opportunity. If you’re considering a move this year, working with a trusted real estate professional can help you time the market wisely, navigate price fluctuations, and take advantage of growing inventory and potential rate cuts.
The national data is informative—but every market is local. Stay tuned for our local lowdown where we’ll explore how these trends are playing out right here in California and how to position yourself for success.
Stay up to date on the latest real estate trends.
You’ve got questions and we can’t wait to answer them.