The United States is home to one of the biggest and most dynamic housing markets in the world. In 2025, the market was valued at roughly 1.5 trillion U.S. dollars in residential real estate transactions, a figure only comparable with the Chinese market. House prices in the United States have grown steadily since 2012, with the annual house appreciation hitting nearly 18 percent during the housing boom in 2021. Nevertheless, price growth has since slowed considerably, weighed down by deteriorating housing affordability, insufficient housing supply, and growing housing costs.
A cooling market with sharp regional divides
Despite a slowdown, house prices continue to grow across most states. North Dakota, Delaware, and Illinois exhibited the steepest annual home appreciation in the fourth quarter of 2025, with prices rising by more than six percent. Florida posted the largest decline, while several other states, including Colorado and Montana, also saw prices fall. Rapid price increases can be attributed to insufficient supply where homes are needed the most. California, the state with the largest population and second-highest house price, is among the states where new construction has not kept pace with demand. Unsurprisingly, eight of the 10 metropolitan areas with the most expensive single-family house prices in the country are located in California.
Affordability at near-record lows
According to the U.S. Housing Affordability Index, 2023 was the worst year for aspiring homeowners, with 2024 and 2025 seeing only modest improvements. While house prices have continuously grown in recent years, incomes have not followed at the same pace. That means that for aspiring homeowners, purchasing a home has become increasingly unaffordable. Soaring inflation and the increase in borrowing costs over the past several years have also played a significant role in eroding affordability. Since 2021, homebuyer sentiment has plummeted, as a majority of Americans consistently reported that it was not a good time to buy a home. Only about 13 percent of renter households could afford to purchase a median-priced home as of mid-2025, down from 17 percent in 2019, a sign that the path to homeownership keeps narrowing.
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