House-Buying Power Jumps Nearly 10% Annually

Housing affordability improved year over year for the ninth consecutive month in November 2025, reaching its strongest level since the summer of 2022. While affordability is still more than 63% below its pre-pandemic, five-year average, the improvement trend has become increasingly clear—and increasingly durable.

The forces that crushed affordability after the pandemic have meaningfully weakened. House price growth has fallen to near zero, mortgage rates are no longer climbing, and household incomes have continued to rise. Together, these shifts have powered the consistent improvement throughout 2025, especially more recently.

Why is Affordability Improving?

In November, the labor market continued to provide critical support for housing affordability. Annual private-sector hourly wage growth increased 3.6% compared with a year earlier, boosting median household income by 3.5% year over year. Just that income growth alone increased house-buying power by roughly $13,100.

Mortgage rates fueled another significant boost. Rates were 0.57 percentage points lower than a year earlier, lifting purchasing power by approximately $23,500. Combined, higher incomes and lower rates mean home buyers have about $36,600 more house-buying power compared with November 2024.

At the same time, house price appreciation has nearly flatlined. Nominal house prices nationally barely moved, increasing just 0.5% annually in November, down from 3.6% one year earlier and marking the slowest pace since 2012. For the eighth consecutive month, income growth outpaced house price growth, steadily increasing affordability.

The dynamics fueling the improving affordability are benefitting home buyers in markets across the country. Forty-seven of the 50 major metro areas we track posted year-over-year affordability gains in November, underscoring that the improvement is broad-based, rather than localized.

Will Affordability Continue to Improve?

Looking ahead, the outlook for affordability will depend on whether today’s favorable dynamics persist. Wage growth is expected to remain positive, even as a cooling labor market could temper its pace. Mortgage rates, according to consensus forecasts, are likely to remain about the same this year. That places the spotlight on house price growth—and, by extension, housing supply.

During the 2021-2022 period of rapid, double-digit price appreciation—when annual gains approached or exceeded 20%—inventory levels were more than 50% below what would be considered normal. Extreme scarcity amplified competition and pushed prices sharply higher. Today, inventory has improved but remains below the historically normal level. The chart below compares monthly inventory levels with the average for the same month during the more balanced 2015–2019 period. The closer the series is to zero, the closer inventory is to normal.

While inventory gaps have narrowed significantly from pandemic-era extremes, the most recent increase in scarcity raises an important caution flag. If the improvement in inventory stalls or reverses course, upward pressure on house price growth may re-ignite. Even with supportive income growth and stable rates, limited supply can constrain affordability gains.

Keep an Eye on Inventory

Nonetheless, life events—job changes, household formation, and relocation—will continue to draw both buyers and sellers off the sidelines in 2026. That gradual life-event re-engagement should support more inventory and more sales transactions.

As long as inventory levels don’t deteriorate dramatically because more buyers than sellers enter the market, house price growth will remain in check, allowing affordability to continue to steadily improve. As the market improves in 2026, keep a watchful eye on inventory.

(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)