U.S. home prices gained steam in January, though buyer activity is moderating due to low inventory and high mortgage rates.
The S&P CoreLogic Case-Shiller National Home Price Index, which measures home prices across the country, rose 4.1% year-over-year in January – slightly higher than the 3.9% increase in December. A measure of 20 cities showed New York had the highest gain, followed by Chicago and Boston. Tampa was the only city to see a year-over-year decline.
High mortgage rates and affordability constraints weighed on confidence for buyers, as long-term homeowners continued to build equity, while first-time homeowners struggled to enter the market. With the country facing tight inventory levels—market conditions vary specifically by region.
“Prices are just rising more slowly due to the fact that we still have an ongoing housing shortage—there is simply not enough home construction in relation to population growth and job growth in the country,” said Lawrence Yun, Chief Economist at the National Association of Realtors.
Though home prices increased — affordability issues weighed on buyers in the second half of the year, with softening prices in areas such as Tampa. Among the 20 cities tracked, only four — New York, Chicago, Phoenix and Boston — managed to see price increases in the second half of the year.
“In some Southern states, we’re seeing a lot of inventory pile up, so we won’t expect a lot of price growth in those regions,” said Joel Bern, Senior Economist at Realtor.com
Jason Pithers, Senior Partner and Real Estate Agent of The Pithers Group in Tampa says he has seen a more normalized market, with some modest appreciation and flattening in some areas. Despite this, he is busy year round — estimating a market of 50% buyers and sellers.
“I think we’re probably a bit of an anomaly in the marketplace, having seen the significant appreciation during the COVID years, which created heavy pressure and low inventory, backed by historically low interest rates. As a result, those inventory levels have remained extremely low,” he added.
High interest rates have added significant costs for consumers – and uncertainty has grown among younger buyers entering the market. Additionally, U.S. consumer confidence continued its sharp 2025 decline as Americans’ views about their financial futures slumped to a 12-year low, driven by rising anxiety over tariffs and inflation.
Low consumer confidence could be a bad signal for first-time buyers, reducing buyer demand, tightening lending conditions, slowing home price growth, discouraging renovations and new construction, and increasing rental demand.
Adding to the pressure of affordability— Trump threatened an additional 25% tariff on Canadian lumber– which is expected to increase construction costs. Back on the campaign trail, Trump cited mass deportation as a tactic for lowering housing costs, but experts remain skeptical about its impact.
Meanwhile, long-term homeowners continue to build equity and remain in the market, further tightening inventory for first-time buyers.
“The current cycle reinforces the value of real estate as a long-duration asset, but also highlights how sensitive home prices are to changes in financing conditions and buyer affordability,” said Nicholas Godec, CFA, CAIA, CIPM, Head of Fixed Income Tradables & Commodities at S&P Dow Jones Indices.
For the rest of 2025 – economists will continue to watch policy changes in the market and whether the administration stays committed to its changes. The spring typically brings a surge in residential real estate activity, but this year’s market remains fiercely competitive, with tight inventory and sellers still benefiting from rising home values.