Affordability Is Improving–Will Sales Follow?
Odeta Kushi is deputy chief economist at First American, Santa Ana, Calif.
Existing-home sales are expected to increase modestly in April, according to First American’s Existing-Home Sales Outlook Report. As the spring home-buying season gets underway, the housing market is showing some signs of improvement, even as overall sales remain below historical norms.
Part of that improvement reflects a shift in affordability. Housing affordability improved meaningfully over the past year, increasing 11%, according to the First American Data & Analytics Real House Price Index. Importantly, the improvement was broad-based. Each of the top 100 markets we track posted year-over-year gains in affordability, the first time that has occurred since October 2024.
This improvement reflects the interaction of the three key drivers of affordability: mortgage rates, nominal house prices and household income. Together, these forces have increased house-buying power and expanded the range of homes within reach for many buyers. While affordability remains stretched by historical standards, even incremental gains can help support housing market activity.
From Affordability to Activity
One way to see how improving affordability impacts market activity is to compare affordability trends with sales across markets heading into the spring home-buying season. Markets where affordability improved tended to see somewhat stronger sales activity, although the relationship is modest.
The chart below plots year-over-year changes in affordability against year-over-year changes in sales. Markets are also colored by house price growth, highlighting how price dynamics are shaping both affordability and activity. The vertical and horizontal lines mark the 100-market average, dividing markets based on whether affordability and sales are above or below average.
Several patterns stand out. In markets such as Cape Coral, Fla., and Sarasota, Fla., affordability has improved more significantly, increasing 16% in both markets, and sales have also increased more strongly. In both cases, house prices have declined, down 8% and 6%, respectively, which has helped restore purchasing power and support buyer activity.
In contrast, affordability has improved more modestly in markets such as Allentown, Pa., and New Haven, Conn., up 1% and 4%, respectively, and sales remain below year-ago levels. These outcomes illustrate how smaller gains in purchasing power may not be enough to meaningfully shift demand.
At the same time, above-average affordability gains do not always correspond to stronger sales. In markets such as Pittsburgh, Pa., and Las Vegas, affordability has improved, but sales activity remains below year-ago levels. This may reflect more cautious demand or limited inventory, suggesting that improved affordability alone does not guarantee an uptick in transactions.
Across markets, price trends play an important role in shaping these outcomes. Declining or slower price growth is generally associated with larger improvements in affordability, which in some cases is enough to bring buyers back into the market. In others, the response is more gradual, depending on local supply conditions and buyer demand. Nevertheless, taken together, the data suggest that improving affordability is beginning to support more sales activity, at least during the spring home-buying season.
What It Means for the Spring Market
As the spring home-buying season progresses, affordability will remain an important foundation for housing demand. The improvement over the past year provides support for buyers who were previously priced out. At the same time, local conditions will shape how that support translates into sales. Differences in inventory, price trends, and buyer demand will continue to drive variation across markets. Improving affordability is supporting demand, but how that translates into sales still depends on where you look.
(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.)
