Home prices are now about 55% higher compared to pre-pandemic levels (February 2020), according to the First American Data & Analytics Home Price Index (HPI) for the month of January. However, the pace of growth in national home prices has hit its slowest pace since the summer of 2023 amid elevated mortgage rates and rising inventories.
“Elevated mortgage rates reduce house-buying power for potential buyers, holding back demand,” explains First American Chief Economist Mark Fleming. “At the same time, inventory levels are increasing as some potential sellers list their homes for sale after coming to terms with ‘higher-for-longer’ rates and more new-home completions hit the market, further dampening price growth.”
As the Fed continues its higher-for-longer interest rate policy, Fleming believes the housing market will, in turn, remain cooler-for-longer. “Much like the groundhog seeing its shadow, we expect this ‘housing winter’ to persist if mortgage rates remain high while inventories keep climbing,” he added.
Property taxes are also significantly affecting homebuyer affordability, nationwide. WalletHub provides a list illustrating which U.S. states are currently tax-friendly and which ones are not.
Luxury Home Price Growth Outperforms Other Market Tiers
At the metropolitan level, home sales prices within local markets are separated into three tiers: the starter tier represents home sales prices at the bottom third of the market price distribution; the mid-tier represents home sales prices in the middle third of the market price distribution; and the luxury tier represents the top third of the market price distribution.
Home prices in the luxury tier grew in 25 of the 28 markets First American tracked in January, outpacing price growth in the mid- and starter tier segments. Flemings finds this unsurprising, considering luxury homebuyers more often tend to pay for home purchases in cash. However, a recent Redfin report notes a declining portion of cash-heavy homebuyers compared to other years.
“Luxury home buyers, less affected by the lock-in effect due to their ability to pay in cash, are playing a different game,” Fleming said.
December’s existing-home sales report found the boom in sales was most distinct at the upper end of the market as sales of homes priced at more than $1 million jumped 35%, nationally, followed closely by homes in the $750,000-$1 million range, which spiked 33%.
“Existing homeowners are playing ‘housing musical chairs’ by selling to each other, a dynamic that is keeping luxury price growth strong in many markets,” Fleming added.
Property Taxes By State
Property taxes have also had a growing influence over homebuyers in terms of where and when to buy a home. In January 2025, CoreLogic reported that property taxes grew 15.4%, nationally, since before the pandemic.
Today, WalletHub released its 2025’s Property Taxes by State report, illustrating which state residents pay the most in property taxes relative to their state.
The average American household spends $2,969 on property taxes for their homes each year, according to the U.S. Census Bureau, and residents of the 26 states with vehicle property taxes tack on another $492. That includes renter households that pay property taxes directly or indirectly.
Hawaii has the lowest real estate tax in the U.S., which is 8.3 times lower than in New Jersey, the state with the highest real estate taxes. The states with the lowest real estate taxes, per WalletHub’s data, are Alabama, Nevada, Colorado, and South Carolina.
States with the highest real estate taxes are New Jersey, followed by Illinois, Connecticut, New Hampshire, and Vermont.
Additionally, the report found that Blue States were found to have 28.35% higher real-estate property taxes, averaging $3,423, than Red States, averaging $2,667.
