Housing affordability continued to improve in October 2025, reaching its strongest level in more than three years as cooling home price growth and easing mortgage rates provided incremental relief to buyers.
According to the latest data from First American, affordability has now improved year-over-year for eight consecutive months, marking the best reading since the summer of 2022. While conditions remain roughly 64% less affordable than the pre-pandemic five-year average, the trajectory is moving in a more favorable direction.
Economists point to a key market indicator driving this shift: months’ supply, which measures how long it would take to sell the current inventory of homes at the prevailing pace of sales. Often described as the housing market’s “price thermostat,” months’ supply helps determine whether pricing power tilts toward buyers or sellers. Low supply typically fuels competition and faster price appreciation, while rising supply tends to cool prices and support affordability.
"The one-two punch that did the most damage to affordability after the pandemic — rapid house price appreciation followed by a sharp run-up in mortgage rates — has lost its force," said First American Chief Economist Mark Fleming. "Price growth has cooled, mortgage rates have eased from their peak, and incomes have continued to climb higher.”
During the tight market of late 2021, months’ supply hovered just above two months, coinciding with year-over-year price growth near 20%. As inventory conditions gradually loosened, price growth slowed. By November 2024, months’ supply had increased to roughly 3.8 months, with price appreciation moderating to 3.5%. In November 2025, months’ supply rose further to about 4.1 months, and nominal home price growth slowed sharply to just 0.6%.
Metropolitan areas with higher months’ supply — such as Austin and San Antonio, Texas, and several Florida markets including Miami, Tampa, and Orlando — are seeing cooler or even negative price growth, translating into improved affordability. Conversely, markets with tighter supply, including Cincinnati, Chicago, Cleveland, and supply-constrained metros like New York and Boston, continue to post stronger price gains.
“In places like Austin, Texas and San Antonio, months’ supply is among the highest on the chart and price growth is weak," added Fleming. "A similar story shows up in parts of Florida. Metropolitan areas, such as Miami, Tampa, and Orlando also have more supply and cooler, or negative, price appreciation, which helps boost affordability relative to markets where months’ supply is low and prices are still rising faster. When the local market offers buyers more options relative to the pace of purchases, the temperature of price appreciation tends to drop. At the other end of the affordability spectrum are markets where months’ supply remains relatively low and price growth is stronger. Cincinnati, Chicago, and Cleveland stand out for hotter price appreciation with less months’ supply.”
Looking ahead to 2026, affordability trends will hinge on the balance between demand and new supply. If inventory growth keeps pace with sales, cooler price conditions may persist. If not, the price thermostat could begin to rise again.
