Although the national housing market remained constrained by elevated prices and limited supply in late 2025, private home values edged higher in the fourth quarter, with the U.S. median home price rising marginally to $365,185 from a flat $365,000 level maintained over the prior two quarters. The modest 0.6 percent quarterly uptick underscored a market still underpinned by structural scarcity, as median home prices climbed in 69.5 percent of the 594 analyzed counties.
The existing-home median price reached $405,400 in December, up 0.4 percent year over year, extending a 30‑month streak of annual price gains. Despite the tempered pace of appreciation, affordability remained historically strained. In Q4, purchasing a national median-priced home required 31.4 percent of typical American wages, and in 29.5 percent of counties, homeownership costs consumed more than 43 percent of local earnings, a threshold often viewed by industry analysts as signaling severe cost pressure.
Over the past five years, median sales prices rose 54 percent compared with a 29 percent gain in typical wages, meaning home price growth nearly doubled income growth and reinforced a widening structural affordability gap. Even so, quarter-over-quarter dynamics showed incremental improvement for many buyers. This tension between rising prices and wage growth is occurring against a backdrop of core inflation running at 3.1 percent, where shelter costs continue to outpace overall consumer prices.
Affordability improved in 86 percent of counties between Q3 and Q4, as wages outpaced home price growth in more than half of local markets. Existing-home sales advanced 5.1 percent in December, delivering the strongest resale pace in nearly three years and capping four consecutive monthly gains not seen since 2020. Reflecting a broader cooling from the pandemic boom, housing starts in 2025 remained below earlier-cycle peaks, reinforcing the supply shortfall that continues to underpin prices.
Lower borrowing costs contributed to this year-end momentum. The average interest rate on 30‑year fixed-rate mortgages declined from 6.34 percent in early October to 6.15 percent by year-end, hovering near 6 percent in late December and encouraging buyers to finalize transactions before 2026, even as Wells Fargo analysts signaled limited scope for further substantial rate compression.
Inventory constraints continued to shape pricing power and transaction volume. Total housing inventory fell sharply to 1.18 million units at year-end, down 18.1 percent from November, yet still 3.5 percent above December 2024 levels. This left 2025 characterized by volatile conditions, persistent inflation pressures, and chronically tight supply. Properties with green certifications have demonstrated resilience in commercial markets, commanding 3-5 percent higher rental premiums as sustainability features gain traction among institutional investors.
Price performance diverged by property type. Single-family homes posted a 0.2 percent year-over-year increase to a $409,500 median in December, while condominium and co-op units registered stronger 1.5 percent gains to $364,400.
New construction pricing moved in the opposite direction. The median sales price of new houses sold declined to $392,300 in October, down 3.3 percent from September and 8.0 percent below October 2024 levels. This indicates selective discounting and builder adjustments amid elevated costs and demand sensitivity.
