Falling home sales may be driven by more than mortgage rates

It’s not only borrowing costs — home prices are still a hurdle

• Home prices increased in 78% of U.S. metropolitan areas in the latest quarter, though that was a bit lower than in the prior quarter.

• The national median price for an existing single-family home climbed to $432,900, up 1.7% from a year earlier, with some markets seeing double-digit increases.

• Affordability remains a major challenge, especially for first-time buyers, who are devoting more than 36% of their income to mortgage payments.

The housing market is under pressure from elevated mortgage rates and affordability concerns, but prices are still rising in most parts of the country, creating another obstacle for buyers that often gets less attention.

A new report from the National Association of Realtors (NAR) says home prices rose in 78% of the nation's metropolitan markets in the latest quarter. That was down slightly from 80% in the previous quarter, indicating that price increases are becoming a little less widespread.

At the same time, the figures suggest that softer home sales are not doing much to cool prices. Nationally, the median price of an existing single-family home rose 1.7% from a year earlier to $432,900.

“Even with affordability challenges causing the housing market to stagnate, home prices continue to set record highs in most parts of the country,” said NAR Chief Economist Lawrence Yun.

Yun said homeowners have gained substantially from rising property values. NAR estimates the average home has appreciated by $146,000 over the past seven years.

For buyers hoping to enter the market, those gains translate into a more expensive path to homeownership.

Markets with the fastest price gains

Some of the biggest increases are showing up in markets that have typically been more affordable than major coastal areas. The Gulfport-Biloxi-Pascagoula metropolitan area in Mississippi posted the nation’s largest year-over-year gain at 11%.

Other markets with notable increases included:

• Rochester, New York: 10.9%

• Jackson, Mississippi: 10.1%

• Beaumont-Port Arthur, Texas: 9.9%

• York-Hanover, Pennsylvania: 9.2%

• Grand Rapids-Wyoming, Michigan: 8.7%

• Cleveland-Elyria, Ohio: 8.6%

• Fort Wayne, Indiana: 8.5%

Even so, the national pace of appreciation is easing. Just 4% of metro areas saw double-digit price growth, down from 5% in the prior quarter.

At the same time, 21% of markets recorded price declines, compared with 20% in the previous quarter.

The Midwest still offers relative affordability

The report also shows sharp regional differences across the country. The Northeast posted the largest annual increase, with the median home price rising 4% to $561,500. The Midwest followed with a 3.6% gain, bringing its median price to $342,500, the lowest among the four regions.

In the South, prices rose 1% from a year earlier to a median of $374,900. The West was the only region to see a decline, with the median slipping 0.6% to $629,000. Even with that drop, the West remains the most expensive region in the country.

California still dominates the list of the priciest housing markets. San Jose-Sunnyvale-Santa Clara recorded a median home price of $1.92 million, followed by Anaheim-Santa Ana-Irvine at $1.47 million and San Francisco-Oakland-Hayward at about $1.35 million.

Yun said the Bay Area’s continued strength is partly tied to the artificial intelligence boom.

Some markets are bouncing back

Florida stands out as one of the more notable turnarounds, after many of its markets saw price declines over the past year.

According to Yun, nearly all Florida markets posted gains in the latest quarter.

He said price drops in some areas may prove temporary, especially where jobs and local economic conditions remain solid.

That may disappoint buyers who had been hoping for a deeper correction in the housing market.

Although some local markets are becoming more affordable, the national data do not point to a broad-based drop in home prices.

First-time buyers are under the most strain

Even when price growth slows, the monthly cost of buying a home remains a major barrier.

NAR estimates that the monthly mortgage payment on a typical existing single-family home, assuming a 20% down payment, reached $2,251 in the latest quarter. That was $48 higher than in the prior quarter and $69 above a year earlier.

The burden is even heavier for first-time buyers. A typical starter home was valued at $368,000, with an estimated monthly mortgage payment of $2,208 based on a 10% down payment.

That payment represented an average of 36.3% of a first-time buyer household’s income, up from 36% in the previous quarter, though still slightly below the 37% seen a year earlier.

The numbers highlight how difficult it has become for younger households to break into the housing market, even where prices are no longer rising quickly.

What the data mean for buyers and sellers

The latest report paints a mixed picture for consumers.

For current homeowners, continued appreciation means more equity and possibly greater financial flexibility. For sellers, the data suggest home values remain fairly resilient, though conditions vary widely by market.

Buyers may find chances in places where prices have started to ease or where homes are staying on the market longer.

Still, waiting for a big price drop could be risky. In many areas, limited inventory and steady employment continue to support home values.

The report also makes an important distinction: slower price growth does not necessarily mean homes are getting cheaper. In most metropolitan areas, prices are still rising, just at a slower pace.

For prospective buyers, the more relevant question may be whether their local market is becoming more affordable once home prices, mortgage rates, taxes, insurance and household income are considered together.

NAR’s findings suggest that affordability, rather than a broad decline in home values, remains the central challenge in the U.S. housing market.