Home Affordability in 2025: What Falling Mortgage Rates Mean for Buyers in Today’s Housing Market

Home affordability remained a major challenge for Americans across nearly the entire country at the end of 2025, according to ATTOM Data Solutions’ latest U.S. Home Affordability Report. In fact, homes were less affordable than historical averages in almost every county nationwide — a reality many buyers have already felt firsthand when shopping for homes over the past year.

Rising home prices, elevated interest rates earlier in the year, and limited housing inventory combined to create one of the most difficult affordability environments in recent decades. For many families, the dream of homeownership felt increasingly out of reach.

But while affordability remains tight overall, there is finally some encouraging movement in the right direction.

Affordability Shows Signs of Improvement Heading Into 2026

ATTOM CEO Rob Barber noted that although affordability remains worse than historic norms in most markets, conditions began improving toward the end of 2025.

“Many Americans were priced out of buying a home in 2025, and affordability remains worse than historic norms in most markets,” Barber explained. “Still, modest, quarter-over-quarter affordability improvements in many markets at the end of the year offered some encouragement.”

According to the report, 86% of counties analyzed were more affordable in the fourth quarter of 2025 than they were in the third quarter. That’s a significant shift after several years of steadily worsening affordability.

The main driver behind this improvement? Falling mortgage interest rates.

How Mortgage Rates Are Directly Impacting Home Affordability

Mortgage rates declined modestly during the latter part of 2025, helping reduce the typical monthly mortgage payment by about 2% compared to the previous quarter. While that may not sound dramatic at first glance, even small rate drops can make a meaningful difference in what buyers can afford.

For example:

• Lower interest rates increase purchasing power• Monthly payments become more manageable• More buyers can qualify for loan approval• Competition can stabilize instead of escalating

When rates drop even half a percent, buyers often gain tens of thousands of dollars in buying power without increasing their income.

For markets like New Jersey, Pennsylvania, and Florida — where home prices remain above national averages in many areas — rate movement plays an even bigger role in affordability.

Why Affordability Is Still Tight Despite Rate Improvements

While falling mortgage rates helped provide some relief, affordability remains strained for several key reasons:

Home prices are still historically highEven with cooling in some markets, most home values are far above pre-pandemic levels.

Housing inventory remains limitedFewer homes for sale continue to push prices upward and create competition among buyers.

Income growth hasn’t fully kept paceWages have increased, but not fast enough to fully offset housing cost increases.

In many counties, homeownership costs still consume a higher percentage of household income than long-term averages — one of the main metrics used in affordability reports.

What This Means for Home Buyers in 2026

The takeaway from ATTOM’s latest report is simple: affordability is still challenging, but the trend is finally improving.

For buyers who were discouraged earlier in 2025, the shifting mortgage rate environment could open new opportunities in 2026, especially if rates continue trending downward.

Here’s what smart buyers should focus on now:

✅ Lock in lower rates when opportunities arise✅ Get pre-approved to understand true buying power✅ Monitor local market conditions closely✅ Work with a mortgage professional who tracks rate movements daily

Even small improvements in affordability can create major long-term savings over the life of a loan.

The Bottom Line on the 2025 Housing Affordability Trend

There’s no denying that home affordability remains tougher than historic norms across most of the U.S. However, the late-2025 shift in mortgage rates provided the first widespread improvement buyers have seen in quite some time.

As rates continue adjusting and markets stabilize, 2026 could bring better conditions for both first-time buyers and move-up homeowners — especially for those who are prepared and positioned to act when opportunities appear.

If you’re considering buying or refinancing in New Jersey, Pennsylvania, or Florida, understanding how affordability trends and mortgage rates impact your purchasing power can make a huge difference in your financial future.