The U.S. economy added 172,000 jobs last month, significantly exceeding expectations and signaling a more stable labor market. However, this positive employment data has done little to improve the outlook for American homebuyers facing persistent affordability challenges.
Wage growth remains sluggish, with average hourly earnings rising modestly by 0.3 percent month-over-month and slowing to an annual increase of 3.4 percent—down from 3.6 percent the previous month. This deceleration, coupled with inflation outpacing wage gains, continues to erode consumer purchasing power. The Consumer Price Index rose 0.6 percent from April and climbed 3.8 percent year-over-year, indicating that real wages have declined for two consecutive months.
The unemployment rate stayed steady at 4.3 percent for a third month, but certain groups are still facing hardships, including Black workers and those unemployed for extended periods. Additionally, job losses in the federal government remain a drag on overall employment figures.
For the housing market, these dynamics mean that job growth alone does not translate into improved affordability. According to housing economists, the real battleground lies between wage growth and inflation rather than headline employment statistics. Rising costs tied to global geopolitical tensions and ongoing tariff policies further strain household budgets.
In response, home sellers have started adjusting their expectations. Median listing prices for homes have fallen for seven consecutive months, marking the largest annual decline since 2017. Currently, the median listing price stands at $429,500, a significant correction from the pandemic-era surge but still well above pre-pandemic levels by over 30 percent. Sellers appear more responsive to current market conditions but price reductions have not yet led to a substantial improvement in affordability for most prospective buyers.
Despite steady demand, indicated by rising pending listings and contract signings, the gap between stagnant real income growth and high living expenses continues to limit many Americans’ ability to enter or move within the housing market. This tension highlights the ongoing challenge of balancing labor market gains against inflationary pressures that affect everyday costs, including homeownership.