How's the U.S. Housing Market?

Despite low unemployment levels, easing inflation, and a robust stock market, many Americans continue to feel the squeeze of high costs—particularly when it comes to housing. Over the past year, relocating employees have also been pinched by increased costs and reduced affordability. That holds true for both buyers and renters. Let's take a look at the U.S. housing market including purchase prices, rent changes, and the impact of current mortgage rates.

Home Prices

Home prices across the United States have shown no signs of decreasing. According to a recent analysis, home prices soared in all 50 of the major metropolitan areas during December. This widespread growth highlights the challenges facing prospective buyers nationwide. The median home price now exceeds $400,000 in many regions, making affordability a pressing concern for first-time buyers and those looking to upgrade their current living situation.

The Redfin report further confirms that home prices rose year-over-year in every major metro area it surveyed. Some of the steepest increases were in cities like Miami, where demand remains high due to factors like favorable weather, lack of state income tax, and an influx of new residents. Other cities such as Phoenix and Tampa have also seen double-digit percentage increases in home prices, driven by limited inventory and robust demand.

While the market’s resilience has surprised many economists, the drivers of these price increases are pretty clear. Low inventory continues to constrain options for buyers, while mortgage rates remain relatively high compared to pre-pandemic levels. This combination has created a perfect storm, leaving many would-be buyers feeling like they’re playing a high-stakes game of musical chairs—but with fewer chairs every round. Cash buyers and institutional investors are also competing with individual buyers, another factor that's part of the problem.

Regional Housing Trends

While the overall trend points to rising home prices, regional differences are worth noting. Coastal cities like San Francisco and New York continue to see higher median prices than inland cities, but the rate of increase has been more pronounced in Sun Belt states. Cities like Austin, Dallas, and Nashville have become hotspots for growth as they attract a mix of tech workers, remote employees, and retirees.

Interestingly, some Midwestern cities, including Cleveland and Detroit, have also seen significant price jumps, albeit from a lower baseline. Historically, these areas have been more affordable than their coastal counterparts, but they're seeing increased interest as buyers search for better value. It’s as if the Midwest whispered, "Affordable homes over here!" and the buyers heard it loud and clear.

Rent Prices: A Parallel Story

For those not looking to buy, the rental market offers little relief. A recent report detailing the biggest changes in rent prices across the U.S. shows that renters, too, are feeling the pinch. Nationally, rents have risen by an average of 5% over the past year, but some cities have seen even more dramatic increases.

Among the cities with the largest rent hikes, Austin, Texas, once again stands out, with rents up nearly 10% compared to the previous year. Other cities like Orlando, Florida, and Denver, Colorado, have also seen substantial rent increases, driven by the same high demand and limited supply. Renters in these cities probably feel like they’re on a rollercoaster ride, but without the fun.

On the flip side, a handful of markets have seen rents stabilize or even decline slightly. In cities like San Francisco and Portland, Oregon, rents have cooled due to factors such as out-migration and an increase in available rental units. These trends show the importance of location and how local economic conditions and population shifts can cause big changes. 

Mortgage Rates and Their Impact

Mortgage rates play a crucial role in the housing market, directly affecting affordability for homebuyers. As of January 2025, the average rate on a 30-year fixed mortgage in the U.S. has decreased slightly to 6.96% after five consecutive weeks of increases. While this dip offers a marginal reprieve, rates remain elevated compared to historical norms, contributing to higher monthly payments for new homeowners.

The Federal Reserve's monetary policies significantly influence mortgage rates. In recent statements, the Fed has indicated a cautious approach to further rate cuts, citing strong economic growth and persistent inflation pressures. This stance suggests that substantial reductions in mortgage rates are unlikely in the near term, maintaining the affordability challenges in the housing market.

Additionally, President Trump's economic policies, including proposed tariffs and tax cuts, could impact inflation and, consequently, interest rates. Economists have noted that such measures may lead to higher inflation, prompting the Federal Reserve to keep interest rates elevated to counteract these pressures. It’s a delicate balancing act, to say the least.

Challenges for Relocating Employees

Employees who accept a relocation opportunity may find themselves navigating a complicated housing landscape. While they might benefit from selling their current home in a high-demand market, finding suitable housing in a new location comes with significant hurdles. In many cases, they face the dual challenge of high home prices and limited inventory. Even if they succeed in purchasing a new home, they are likely to encounter elevated mortgage rates, which could lead to higher monthly payments and tighter budgets.

For those opting to rent instead of buy, the situation is not much easier. Relocation often involves moving to metropolitan areas where rents are rising rapidly, leaving renters with fewer affordable options. Employers offering relocation packages may need to consider including housing stipends or temporary accommodations to ease the transition for their employees.

The Broader Implications

The combined rise in home prices, rents, and sustained mortgage rates is having a profound impact on Americans’ financial well-being. For buyers, higher home prices often mean larger down payments and monthly mortgage payments, putting homeownership further out of reach for many. Renters, meanwhile, are dedicating an increasing share of their income to housing costs, leaving less room in their budgets for savings, investments, or discretionary spending.

For employers and policymakers, these trends highlight the need for solutions that address housing affordability. Long-term solutions will require increased investment in housing supply, particularly affordable housing, and policies that support first-time homebuyers and renters. Your company will need to stay informed about market trends and respond accordingly. 

Looking for more to consider? Try these:

Will Homeowners Finally Sell in 2025? Here’s What the Experts Say, Amid a Glimmer of Hope

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