Rising U.S. Home Prices Squeeze Buyers: What the Latest Data Says About Affordability, Inventory, and the Road Ahead

Executive summary

Home prices are still climbing, and the relief from slightly lower mortgage rates hasn’t been enough to restore affordability—especially for first-time buyers. August existing-home sales slipped to a 4.00 million annual pace (-0.2% m/m), even as the median price rose 2% y/y to a record August level of $422,600. Inventory remains tight at 1.53 million units—only 4.6 months of supply—keeping bargaining power with sellers in many markets. Mortgage rates eased to the 6.26–6.30% range by late September, but remain well above pre-pandemic norms, limiting how far buyer purchasing power stretches. (National Association of REALTORS®)

The price backdrop: still up, even before the fall selling season

Two of the most watched national price gauges confirm that the price uptrend was intact through early summer:

• S&P CoreLogic Case-Shiller (national) showed the June 2025 index at 331.5 (NSA), modestly above May and near record territory. On a seasonally adjusted basis, the national index printed 326.4 in June. (Next update: Sept 30.) While 12-month gains were subdued versus 2021–22, directionally prices remained firm. (FRED)
• FHFA House Price Index (July) reported positive y/y gains across all nine census divisions, with monthly changes mixed by region (-0.8% to +0.3% SA). The breadth of y/y gains underscores the difficulty first-time buyers face: affordability is pinched almost everywhere, not just in a few “hot” metros. (FHFA.gov)

Taken together with August’s record median resale price ($422,600) from NAR, the message is simple: price stickiness has persisted despite cooler sales volumes. For would-be entrants saving down payments while paying rising rents, that’s a double bind. (National Association of REALTORS®)

Sales and supply: a fragile equilibrium that favors sellers

August existing-home sales slipped 0.2% m/m to a 4.00 million annual rate. That’s 1.8% higher y/y, but still weak by historical standards (pre-2020 norms were 5–5.5 million). Inventory edged down 1.3% m/m to 1.53 million, equivalent to 4.6 months of supply—an improvement from 2024, yet below the 6-month level typically associated with a balanced market. Regional patterns highlight the affordability gradient: sales rose in the Midwest and West (where relative affordability improved) but fell in the Northeast and South. (Reuters)

With months’ supply under five, sellers still retain leverage on well-located, entry-level listings—precisely where first-time buyers compete. That leverage shows up as smaller price cuts, faster time-to-contract than in higher price tiers, and persistent multiple-offer pockets even as overall activity looks sluggish. (NAR’s release notes that first-time buyers accounted for 28% of transactions—better than a year ago, but still below the ~40% share that was common in earlier cycles.) (National Association of REALTORS®)

Mortgage rates: lower than 2023 peaks—but not “low”

Borrowing costs have improved since last year’s highs, yet remain restrictive versus 2015–2019 norms:

• 30-year fixed mortgage: 6.26% on Sept 18, ticking to 6.30% on Sept 25 (Freddie Mac PMMS). That’s down from 2023 peaks >7%, but far above the 3–4% era many households still use as an anchor. (Freddie Mac)
• Payments and affordability: MBA’s Purchase Applications Payment Index (PAPI) shows the median applied-for monthly payment fell to $2,100 in August (from $2,127 in July), reflecting rate relief and some compositional shifts. Affordability improved at the margin—but remains tight with incomes struggling to keep pace with payment growth since 2020. (MBA)

In plain terms: a 25–50 bps dip doesn’t fix a 40–50% price rise since 2019. Even if rates grind lower as the Fed proceeds carefully, payment-to-income ratios are likely to remain stretched unless prices cool or wages outpace housing costs for a sustained period. (Reuters)

Who’s buying—and who’s sidelined

A noteworthy shift in the August mix: investors accounted for ~21% of sales, the highest since early 2024, while all-cash transactions eased to 28%. Investors—particularly medium-sized ones—are more likely to use cash or portfolio financing and can look through near-term rate noise, competing directly with first-time buyers for entry-level stock. That dynamic constrains inventory where it matters most for affordability. (Barron’s)

First-time buyers, often reliant on low-down-payment loans, face two headwinds: (1) rate sensitivity translates into tighter debt-to-income screens; (2) down-payment accumulation struggles to keep pace with prices. While some builders are buying down rates and offering credits in the new-home segment, the existing-home market—four times larger—offers far fewer concessions on starter homes. (AP News)

Why affordability hasn’t snapped back (yet)

Affordability is a three-variable problem—prices, rates, income—and the current mix isn’t yet supportive enough:

1. Prices remain elevated. Case-Shiller and FHFA both show ongoing y/y gains, even if slower than 2021–22. Without outright price declines or a long flat spell, monthly payments remain high. (FRED)
2. Rates are “less bad,” not “cheap.” A 30-year at ~6.3% can unlock some demand from earlier in 2025, but it’s nowhere near the 3% threshold that powered the 2020–2021 surge. (Freddie Mac)
3. Incomes trail payments. MBA’s PAPI improvement is welcome, but the cumulative run-up in principal+interest since 2020 has far outpaced median wage growth. Even modest rate declines may be absorbed by persistent price firmness, leaving entry-level affordability little improved. (MBA)

Net effect: household formation is still funneling into rentals in many metros, supporting investor participation and keeping for-sale inventory tight—particularly in affordable price bands. (Barron’s)

The near-term outlook: what could shift the balance

1) Rates drift lower—but glidepath matters. If mortgage rates settle toward the low-6s or high-5s into late 2025, demand from sidelined “rate-capped” buyers could re-emerge. Yet, the speed of that decline matters: a slow glide gives sellers time to hold prices; a sharper move could release pent-up demand and paradoxically push prices up if inventory doesn’t keep pace. (Freddie Mac)

2) Inventory mix over inventory count. NAR shows supply at 4.6 months, but affordability hinges on starter-home availability. If turnover rises mainly in higher-priced tiers, the median can rise even as sales underwhelm. Builders can help with smaller footprints and incentives—but the resale channel needs more listings in sub-median bands to move the affordability needle. (National Association of REALTORS®)

3) Region-by-region relief. FHFA’s July data show some regions cooling on a monthly basis (e.g., Middle Atlantic), while others inch up. That dispersion creates localized opportunities (Midwest affordability outperformed in August) even as the national narrative stays tight. (FHFA.gov)

4) Investor footprint. If cash-heavy investors maintain a ~20% share, they will keep competing for entry-level stock. A decline in cap-rate spreads or tighter financing for investors could open space for first-time buyers; conversely, a rental-demand boom would entrench investor participation. (Barron’s)

What it means for first-time buyers (context only, not advice)

• Budget realism beats rate hope. Rate dips help, but buyers should expect payments to remain elevated relative to 2019 unless their local market exhibits price softness. The mix of homes available—not just the rate—will drive outcomes. (Educational context based on cited data.)
• Time on market is inching up. AP and NAR note homes are spending a bit longer on market, prompting more price reductions at the margin. Carefully tracking local list-to-sale dynamics could improve negotiating odds, especially beyond the hottest neighborhoods. (AP News)
• New-build incentives vs. resale scarcity. Builders’ rate buydowns and credits can partially offset payment shock; the resale market generally offers fewer concessions on entry-level homes. Consider the total monthly cost (PITI + HOA/MI) rather than sticker price alone when comparing segments. (AP News)

(Again: the above is general education, not individualized advice.)

What to watch next

• Case-Shiller (through July) — Sept 30: Confirms whether early-summer firmness persisted into the heart of the buying season. A cooling in sequential gains would hint at price stabilization; another firm print would underscore sticky price dynamics. (FRED)
• FHFA Monthly HPI (July) — Sept 30: Provides a broader look across price tiers and GSE-backed segments; regional monthly changes are key for spotting affordability bright spots. (FHFA.gov)
• Freddie Mac PMMS (weekly): Every ~10 bps change in the 30-year rate meaningfully shifts the monthly payment. Keep an eye on whether rates sustain ~6.25–6.30% or break lower into the high-5s. (Freddie Mac)
• MBA purchase applications & PAPI: A steadier decline in the median applied-for payment would signal real affordability healing, not just headline rate noise. (MBA)
• NAR existing-home sales (September): The next read on whether lower rates are unlocking transactions or if price stickiness is still crowding out first-timers. (National Association of REALTORS®)

Bottom line

The U.S. housing market remains price-firm and affordability-tight. August resale prices set a record for that month even as sales volumes lag, and mortgage rates—though lower than 2023 peaks—still bite. Investor activity has crept up, adding competition in the exact price bands first-timers target. Unless one of three things happens—a deeper rate decline, a meaningful starter-home inventory build, or a multi-quarter price plateau—the path to improved affordability will likely be gradual, not sudden. That implies a slow-healing recovery where sales stabilize before affordability truly normalizes. (National Association of REALTORS®)

Sources (primary/high-quality)

• NAR — Existing-Home Sales (Aug 2025): 4.00M SAAR (-0.2% m/m), median price $422,600 (+2% y/y), inventory 1.53M, 4.6 months’ supply. (National Association of REALTORS®)
• Reuters/AP coverage (Aug 2025 sales): Affordability constraints despite lower mortgage rates; investor share ~21%; first-time buyers 28%. (Reuters)
• Freddie Mac — PMMS: 30-yr FRM 6.26–6.30% in mid-to-late Sept 2025. (Freddie Mac)
• MBA — PAPI (Sept 25 release): Median applied-for payment $2,100 in August (from $2,127). (MBA)
• S&P CoreLogic Case-Shiller (June 2025) & FHFA HPI (July 2025): National indexes show continued y/y price gains; regional dispersion growing. (FRED)
• Barron’s (investor share context): Investor purchases ~21% as cash buyers lean into rental demand. (Barron’s)

Editorial standards & financial disclosure

This article is educational and informational only and does not constitute investment, legal, or tax advice. We do not provide buy/sell/hold recommendations. Statistics reflect seasonally adjusted (where noted) and nominal dollars; figures may be revised by their sources. Always check the original releases before acting. No compensation was received from any company, product, or issuer mentioned.