Housing Market Headwinds May Not Signal A Bust

Not every housing boom ends with a bust — and this most recent one may prove it.

That’s the takeaway from the latest First American Data & Analytics Real House Price Index (RHPI) and analysis from First American Deputy Chief Economist Odeta Kushi. The RHPI data suggest mortgage professionals should expect a market defined by slower, more uneven price movements — not the kind of widespread crash that followed the last major housing boom.

Preliminary data for June and July show affordability improving for six straight months, thanks to easing mortgage rates, slowing price growth, and rising incomes. May 2025 saw a 4.4% year-over-year gain in affordability — the largest since October 2023 — though Kushi noted it remains historically low.

While nominal price growth has cooled to single digits, nearly half of the 50 largest markets tracked saw prices either decline or grow less than 1% in May. San Francisco posted the steepest annual drop at nearly 7%. Still, Kushi points to stark differences from the pre-2008 environment:

• Stronger Loan Quality: Today’s borrowers have higher credit scores (median 772 in Q1 2025) and face more conservative underwriting, with risky loan products largely absent.
   
• Healthy Equity Buffers: National loan-to-value ratios average just 28%, well below 2008’s ~50%, giving homeowners more options to avoid foreclosure.
   
• Persistent Supply Shortage: More than a decade of underbuilding means inventory remains tight, particularly in the Northeast and Midwest, even with this year’s modest increases.

State and Local Market Movers

As is typically the case with the housing market, price trends are diverging widely by state and metro area. 

In May, the states with the largest year-over-year RHPI gains were: 

• South Dakota (+7.3%); 
• Maine (+3.3%); 
• New Hampshire (+2.8%); 
• Connecticut (+1.8%); and 
• North Dakota (+1.2%).

The states with the largest year-over-year RHPI declines were: 

• Florida (-11.2%); 
• Montana (-9.9%); 
• Wyoming (-9.6%); 
• Texas (-8.8%); and 
• Nevada (-8.8%).

Among major metro areas, Hartford, Conn. (+4.8%) led price growth, followed by Milwaukee (+3.2%), Louisville, Ky. (+2.6%), Philadelphia (+1.0%), and Cincinnati (+0.5%). Tampa, Fla. (-14.8%) saw the sharpest drop, with Miami (-14.2%), Seattle (-13.6%), San Francisco (-13.6%), and Orlando, Fla. (-10.8%) also falling steeply. Note that among the five metro areas with greatest declines, three were in the Sunshine State. 

Kushi emphasized that while regional variations will persist, the national market’s fundamentals point toward a gradual softening — not a collapse. “The structural shortage of supply relative to demand will put a floor on how low prices can go,” she noted.