National Picture: Buying Power Shrinks Sharply
Only 28% of U.S. homes are now affordable for a median-income household, down from 55.7% in 2019. This steep decline highlights how much harder it has become to purchase a home.
The maximum affordable home price for a median-income earner is now $298,000, down nearly $27,000 from $325,000 in 2019.
Despite incomes rising by approximately 15.7% since 2019, higher mortgage rates have significantly eroded purchasing power.
Why Is Buying Power Dropping?
Mortgage rates remain elevated, averaging around 6.5–6.75%, compared to just 2.65% in early 2021—adding an extra $600 per month or $7,200 annually to homebuyers’ costs.
New single-family home sales declined in July to a seasonally adjusted annual rate of 652,000 units, down 8.2% year-over-year. Median prices for new homes dropped to $403,800, yet inventory remains exceptionally high—near 2007 levels.
Higher borrowing costs, alongside sluggish wage gains and a softer labor market, continue to suppress demand.
Regional Variations: Some Cities More Resilient
Markets Most Deteriorated:
Milwaukee: Buying power down 10.5%, max affordable price dropped from $314K to $281K.
Houston, Baltimore, New York City, Kansas City: Each saw around 9–9.4% decline in buying power. In NYC, just 13.1% of homes remain affordable.
Markets With Improved Buying Power:
Cleveland tops the list with a 4.4% increase, making the max affordable price rise by $11K to $260K, though only half of homes are affordable.
Phoenix (2.5%), Richmond (1.5%), Indianapolis (1.3%), Tampa (0.4%), and Austin (0.3%) also saw modest improvement—but still lag behind 2019 affordability levels.
Market Dynamics Favor Buyers in Cooling Areas
Rising inventory and slower price growth are giving buyers leverage in some regions. Increases in active listings nationwide are lending buyers new negotiating power.
Existing home sales are sliding slightly, while listings sit longer. July saw 58 median days on the market, five more than June and seven more than a year ago.
Price growth is stalling: annual growth rates have slowed. Some cities like Oakland (−6.8%), West Palm Beach (−4.9%), Jacksonville (−3.1%), Austin (−2.9%), and Houston (−2.8%) are experiencing falling home prices.
Homes priced under $499K are seeing stronger demand, especially among new home purchases; builders are cutting prices to stimulate sales.
Broader Forces Shaping the Landscape
The Federal Reserve is expected to cut interest rates likely in September, but new rates may remain above pre-pandemic norms, limiting relief for borrowers.
Inventory expansion, especially in previously overheated Sun Belt markets, is helping cool prices—potentially easing affordability constraints.
Meanwhile, home equity remains a crucial wealth source—as of early 2025, homeowners hold over $35 trillion in equity, comprising about 43% of typical net worth.
Importantly, expanded credit access via VantageScore 4.0 (adopted July 2025) may help up to 5 million additional Americans qualify for mortgages, particularly those with non-traditional credit histories.
Final Thoughts
American homebuyers face significantly eroded buying power in August 2025 due to stubbornly high mortgage rates and rising home prices. While most metros have seen affordability fall, a handful—like Cleveland—have offered modest relief thanks to stronger local income growth.
That said, growing inventory, regional price cool-downs, and buyers’ increased negotiating power are offering glimmers of opportunity. Meanwhile, institutional changes like VantageScore adoption and anticipated rate cuts may gradually reshape the affordability landscape in the months ahead.
Please note: Any opinions discussed in this article belong solely to the author, Marissa Berends, and do not necessarily reflect the views of Capitol Lien.
About the Author
Marissa Berends is a Certified Abstractor and Industry Relations Coordinator at Capitol Lien, a nationwide due diligence and risk mitigation services provider. Since joining the company in September 2021, she has earned abstractor certifications in Minnesota, Nebraska, and North Dakota. She is pursuing her Wisconsin Title Examiner certification, which is expected to be completed in Fall 2025.
Marissa is involved with the following groups: Wisconsin Land Title Association’s (WLTA) Convention Committee & Young Title Professionals; Nebraska Land Title Association’s (NLTA) Convention Committee; Property Record Industry Association (PRIA) National Education Committee; Illinois Land Title Association’s (ILTA) Inclusion, Diversity, Equity & Acceptance (IDEA) Committee; and the National Association of Land Title Examiners and Abstractors (NALTEA).
About Capitol Lien
Capitol Lien empowers real estate and title professionals with trusted public record research and due diligence services nationwide. With 35 years of experience, Capitol Lien specializes in fast, accurate property and title searches, lien reports, and document retrieval that help title agents, underwriters, and legal teams operate their businesses with confidence. The Capitol Lien team takes the hassle out of title research with local experts and innovative tools that make it easier to mitigate risk, stay on schedule, and keep your closings moving smoothly.
Learn more at capitollien.com. Ready to simplify your title research? Send your next order to Capitol Lien and experience the difference trusted diligence makes. Stay in touch with Capitol Lien on LinkedIn for industry updates and information. Reach out! contact@capitollien.com or 800-845-4077.
Sources:
Mortgage Professional: Majority of US homes out of reach for typical buyer
Fox Business: Only 28% of US homes now affordable for typical American household as buying power drops
Reuters: New US home sales fall as high borrowing costs stifle housing demand
Realtor: Shrinking Budgets: How Higher Mortgage Rates Have Affected Buying Power
Churchill Mortgage: August 2025 Monthly Housing Market Update
Money: Cooling Housing Market Gives Buyers the Upper Hand in 2025
Empower: Why buyers are slowly gaining an edge in a challenging housing market
The Guardian: Federal Reserve set to cut interest rates – but Trump won’t be happy
San Francisco Chronicle: Powell’s hint of a Fed cut raises stakes for California’s housing market
Bankrate: Housing Heat Index 2025
Wikipedia: Home equity; VantageScore