Home prices adjusted for inflation fell in the second half of 2025 in a sign the housing market has hit an affordability ceiling.

Tuesday’s S&P Cotality Case-Shiller Index, which tracks single-family home prices nationwide, clocked in at a 1.3% increase year-on-year in December, which is half the rate of inflation over the same time period. Inflation has been outpacing the index since June. 

The data is the latest in a slew of recent reports that the housing market is softening: home sales are at a 30-year low, and a majority of listings are closing at below asking price. This is driven by historically elevated interest rates – 30-year fixed mortgages are currently averaging 6% – combined with more supply of homes on the market.

“Inflation [is] effectively eroding real home values for most owners,” said Nicholas Godec, an analyst at S&P Dow Jones Indices, in a statement. “This marks a notable reversal: over the past decade, national home prices outpaced inflation.” 

The slowdown heralds an end to a decade-long run of steadily rising real estate values, and can be seen as a welcome correction to the red-hot housing market of the post-pandemic years. In 2022, the median sale price for a single-family home was a record high of 5.6 times the median household income, according to Harvard’s Joint Center for Housing Studies. 

“Homebuyers are strained to afford homes at these current prices,” said Stan Shipley, an analyst at financial advisory firm Evercore ISI. “The only thing for them is to come down.” 

Case-Shiller provides a snapshot of the US housing market by tracking repeat sales of single-family homes, excluding all new construction as well as co-ops, condos, and apartment buildings. 

Concerns that the housing market would be on the brink of a more dramatic crash, like the one of 2007, are overblown, according to Shipley. “Those were special circumstances caused by poor regulations and bad loans, and that is not happening now,” he said. “Inventories are up, but they are not what we were seeing in -05.”

There are also regional differences. House values in New York, Chicago and Cleveland are still staying strong, with increases of over 5% annually. Sun Belt cities of Tampa, Phoenix and Dallas, which all had a pandemic-era housing boom, are now seeing steady declines even in nominal terms.