Home prices are barely rising — but inflation and rates keep housing affordability strained

What the latest price data actually says

By the end of 2025, national home-price growth had slowed to one of the weakest paces in years. The S&P Cotality Case-Shiller National Home Price Index showed prices up 1.3% year over year in December 2025, down from 1.4% in November, and down 0.3% month over month before seasonal adjustment. [housingwire.com]

The key nuance is inflation: S&P indicated inflation outpaced home-price gains in 2025, turning real (inflation-adjusted) home-price returns negative. That’s a different story than "home prices are falling" in nominal terms, but it helps explain why many households still feel squeezed even when headline appreciation cools. [housingwire.com]

Affordability is still the binding constraint

Cooling prices alone hasn’t restored broad affordability. A fresh NAHB analysis finds that in 39 states and the District of Columbia, more than 65% of households are unable to afford the median-priced new home—highlighting a persistent mismatch between prices, mortgage rates, and incomes. [nahb.org]

The state examples show how widespread the issue is. NAHB points to New Hampshire as the steepest affordability problem in its analysis (83.4% of households unable to afford the state’s median new home price of $677,982). [nahb.org]

Turnover remains low — and that affects supply and spending

One reason the market feels stuck is that transaction volume remains depressed. Realtor.com notes that 2025 existing-home sales totaled 4.063 million, the lowest annual level since 1995, reflecting the persistence of rate lock-in. [realtor.com]

Low turnover matters because it limits the normal churn that creates choices for buyers (and move-up sellers), even if listings have improved from the trough. It also affects adjacent housing activity. For example, Home Depot’s latest results and commentary highlighted that housing transactions fell 6.3% in the quarter, and the company expects affordability pressures to persist even as it guides for roughly flat-to-modestly higher comparable sales in 2026. [axios.com]

Rent pressure: a case study from Dallas

Affordability strain isn’t confined to would-be buyers. A Texas Tribune report on Dallas describes a deep shortage of rental homes affordable to households making 50% of area median income (about $52,000 for a family of four). The report cites an estimated shortfall of roughly 46,000 rental homes as of 2023, up from 33,660 two years earlier, and notes that Dallas has about 60 affordable rental homes for every 100 households at that income level. [texastribune.org]

These types of rental-market gaps can keep rent-burden rates high even when headline asking-rent growth slows in some metros, because the binding constraint is often the supply of units affordable at lower income thresholds.

What to watch next

Going into the spring 2026 season, the key questions are whether inventory gains translate into more price reductions, and whether mortgage rates ease enough to meaningfully expand buyer qualification. The other big watch item is whether rental affordability improves as new supply delivers—especially in fast-growing metros where the shortage of lower-cost units is acute.