Gareth Taylor's side have lost twice in the league and no team has won the WSL title having lost more than two games.

"We're up for the challenge," Houghton told BBC Sport.

"It's close at the top. We knew we had a squad that could compete with the best teams in the league.

"There have been some results that we were a little disappointed in with ourselves - [losing 1-0 at home to] Brighton for example - but in terms of performances after that, they have been really good.

"The scary thing is I don't think we're playing at our highest level yet. Everyone is full of confidence and we can't wait to get back playing again really."

City compete in the Women's FA Cup before returning to league action on Sunday, 21 January when they host fifth-placed Liverpool.

Manager Taylor said before their victory over rivals Manchester United at Old Trafford that he thought his side would need to go unbeaten for the rest of the 22-game season.

"That's the beauty of the league - you need to be near perfect," added Houghton. "There aren't many slip-ups because of the number of teams in the league.

"I know it's a cliche but you do have to take the games one at a time. We've shown flashes of what we can do and if we can do that more consistently, I really do think we'll be in the mix for the title."

Chelsea have dominated English women's domestic football under manager Emma Hayes and City have not won a WSL title since 2016, having come runners-up five times since.

Houghton, 35, says she has the "utmost respect" for their rivals - but it is that success she craves with City.

"They have won a lot over recent years and have been the most consistent team. That's what generally wins the WSL," added Houghton.

"That Covid season (where Chelsea were awarded the title on a points-per-game basis) was probably our most disappointing because that was the year we thought we turned it and could have won the title but it wasn't meant to be.

"A club like us, to have not won the league title for eight years, is disappointing because of the standards we set. It's something that is on our mind. We just need to know that when it comes to the crucial points, we are there."

'I'm proud to be from the north-east'

As well as chasing a league title, City hope to go all the way in both cup competitions, including the Women's FA Cup, which they join in the fourth round this weekend.

For Houghton, it is a special return home to the north-east with City drawn against Championship side Durham at Maiden Castle.

Houghton was born in Durham and began her career at Sunderland - the football club she supports - before going on to captain England for eight years, picking up 121 international caps and playing in five major tournaments.

"It's nice to go back home. They train on the pitch that the likes of Jill [Scott], Demi [Stokes] and myself did our England programme at," said Houghton.

"To go back and relive those moments which helped us get to where we are today, yeah, I'm looking forward to it. I can't wait to see all the family as well.

"I love my hometown. I love being from the north-east and I'm proud to be from there. I do feel a lot of my attributes on the pitch are because of the people I grew up with.

"They were hard-working people, from working-class families. They took nothing for granted and earned what they got. When I go back, that's the reminder I get of who I am as a person. If you stick to that, then you can go as far as you want."

'There is no question - my future is here'

Steph Houghton came off the bench at Old Trafford to help Manchester City beat Manchester United 3-1 in the WSL in November

The 35-year-old is celebrating her 10th season at City and has picked up eight major trophies with the club since joining from Arsenal in 2014.

Former team-mates Ellen White and Jill Scott have retired in recent years but Houghton says she still "loves coming to work every day" despite having less game time than previously.

"Firstly, I'm physically in really good shape. Mentally, of course my role has changed at the club," said Houghton.

"I'm not guaranteed to start all the time. That's what happens at top clubs, we bring in younger players and we need to develop them. My role has changed but I've grabbed it with both hands.

"Every day I want to learn as much as I possibly can and develop in different areas. When Jill and Ellen retired a few years ago, they were saying 'how are you still doing it?' I actually don't know but I love my football. I live and breathe it.

"I intend to be here as long as Manchester City want me to be here. I know what age I'm at and where I am in my career but that's a decision I need to make with my family, my husband and for me personally on whether I am ready to stop.

"But at the moment, for the foreseeable future, I still feel I can contribute. I am a winner and I feel the experiences I've had over the last 10 years has helped. I do know what it takes to win.

"As long as I have a role to play and I'm valued, I'm happy to stay. If I feel the love from the club then there is no question about it for me, that my future is here."