Falling home prices are giving buyers some leverage in a growing number of markets, but they have not been enough to produce a sustained recovery in affordability.
Housing affordability deteriorated for the fourth consecutive month in June, according to the latest Real House Price Index from First American Data & Analytics. Affordability nevertheless remained approximately 5% better than it was a year earlier.
The monthly reversal comes as national home price growth slows and outright declines spread. Nominal home prices increased just 1.1% from a year earlier in June, while prices declined in 22 of the 50 largest markets tracked by First American.
“The recovery in housing affordability is proving to be anything but a straight line,” First American Chief Economist Mark Fleming said.
For loan originators, the figures point to a purchase market that is becoming increasingly local. Price reductions may create openings for borrowers in markets with rising inventory and weaker demand, but affordability remains highly sensitive to mortgage rates, household income, and conditions within individual metropolitan areas.
NMP previously reported that seller price cuts have helped keep the purchase market moving, even as elevated mortgage rates continue to constrain demand. More recently, July home sales fell to their lowest level in nearly two years, with local employment, inventory, and borrower wealth producing sharply different results across markets.
Buying Power Improves Annually, Slips Monthly
First American’s Real House Price Index measures home prices after accounting for changes in household income and mortgage rates. An increase in the index indicates declining affordability, while a decrease indicates improving affordability.
Real, or purchasing-power-adjusted, home prices increased 0.4% between May and June but declined 5.4% from June 2025.
Consumer house-buying power, which estimates how much home a buyer can afford based on household income and mortgage rates, decreased 0.3% from May but remained 6.8% higher than a year earlier. First American estimated that median household income increased 3.2% during the same 12-month period.
The combination explains the mixed affordability picture: Buyers had more purchasing power than they did a year ago, but some of that improvement has been eroding month by month.
Affordability Gains Vary Widely By Market
The largest annual declines in First American’s purchasing-power-adjusted home prices occurred in Colorado Springs, Colorado, down 12.2%; Seattle, down 11.2%; Tampa, Florida, down 10.7%; Las Vegas, down 9.3%; and Lakeland, Florida, down 8.7%.
Because those figures are adjusted for mortgage rates and household income, the declines represent improving affordability rather than equivalent drops in the prices sellers receive.
At the state level, purchasing-power-adjusted prices declined most in New Mexico, down 9.6%; Washington, down 9%; Florida, down 8.8%; New York, down 8.7%; and Georgia, down 8%.
Affordability worsened in a smaller group of states. The index increased 1.9% in Montana, 1.8% in Wyoming, 1.4% in Idaho, 1.1% in Nebraska, and 1% in Maine.
Among the metropolitan areas tracked by First American, Rochester, New York, recorded the largest annual increase in real home prices at 5.3%, followed by Syracuse, New York, at 4.7%; Omaha, Nebraska, at 2.7%; Albany, New York, at 2.1%; and Cleveland at 2%.
Falling Prices Do Not Signal A Foreclosure Wave
The spread of price declines could raise concerns about homeowner distress, but First American said the conditions required for a widespread foreclosure crisis are not currently present.
Fleming said foreclosure risk generally rises when homeowners experience both an income shock that prevents them from making their mortgage payments and insufficient equity to sell the property.
Homeowners still have a substantial buffer. Nominal prices remain above their February 2020 levels in all 50 of the largest markets and are approximately 52% higher on average.
Seattle prices declined approximately 2% during the year ending in June but remained about 36% above their February 2020 level. San Francisco had the smallest cumulative increase among the 50 markets, yet prices there were still nearly 19% above their pre-pandemic level.
The labor market also remains relatively resilient. First American found that 26 of the 50 markets had seasonally adjusted unemployment rates below the 4.2% national rate in June, while three matched it.
Fresno, California, had the highest unemployment rate among the markets at 7.9%, but its home prices remained nearly 48% above February 2020 levels.
“A foreclosure wave requires two triggers: homeowners who can no longer pay and lack sufficient equity to sell,” Fleming said. “For now, those triggers remain far apart.”
That national equity cushion does not mean every borrower is protected. NMP recently reported that record homeowner equity is masking increased distress among some recent FHA and VA borrowers, particularly those who purchased near local price peaks with small down payments.
Falling prices may improve a buyer’s negotiating position without producing the distressed inventory associated with the last housing downturn. The immediate opportunity is therefore not a wave of foreclosure sales, but a more fragmented purchase market in which borrower buying power and property-level pricing require closer attention.
