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U.S. Housing Market: What's in Store for the Rest of 2025?

• David (Viacheslav) Davidenko

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The landscape of the American housing market has transformed dramatically. After years of skyrocketing prices—6% growth in 2022, 5% in 2023, and 4% in 2024—we're witnessing an unprecedented standoff that's brought price appreciation to a virtual standstill at just 0.5% year-over-year by mid-2025.

What's created this remarkable stalemate? We dive deep into the powerful opposing forces shaping today's market. On one side, stubbornly high mortgage rates between 6.7-7% have suppressed buyer demand. On the other, an extraordinary statistic explains why homes aren't flooding the market: over 60% of American homeowners currently enjoy mortgage rates below 4%. This "lock-in effect" has created a market that's cooling but not crashing—a crucial distinction with significant implications for buyers and sellers alike.

The numbers tell a fascinating story. While inventory has increased 32% from last year, existing home sales remain at 30-year lows. Homes now typically sit on the market for 40 days (up 5 days from 2024), and 40% of listings have experienced at least one price reduction—the highest rate in 15 years. Nearly half of sellers now offer concessions like closing cost assistance or mortgage rate buy-downs. Regional variations add another layer of complexity, with some Sunbelt markets seeing modest price declines while other regions maintain slight growth.

Looking ahead, expert forecasts range from -2% to +4% for the remainder of 2025, suggesting a period of relative stability after years of volatility. Whether you're considering buying, selling, or simply understanding the economy, this episode provides essential strategic insights for navigating this transformed housing landscape. Subscribe to stay informed as we continue tracking the evolution of this pivotal market shift!

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Speaker 1:

Welcome to the Deep Dive. You know if you've been keeping an eye on the US housing market. Well, it's just painting a completely different picture lately, isn't it?

Speaker 2:

Oh, absolutely Nothing like that pandemic era frenzy we all got used to.

Speaker 1:

Right, we saw those huge price surges. Was it 6% in 2022, then 5% in 2023, and still like a solid 4% just last year, 2024.

Speaker 2:

Strong growth.

Speaker 1:

But now, as of say, mid-june 2025, that momentum has just well, it's practically flatlined. Prices are only up about 0.5% year over year.

Speaker 2:

It's quite a shift, a really striking contrast, yeah.

Speaker 1:

Okay, so let's unpack this. Our mission today is really to dig into these latest housing stats, pull out the you know, the important bits and explore the trends shaping things as we head towards the end of 2025.

Speaker 2:

And we want to make sure this goes beyond just rattling off numbers for you. We'll get into the why, why the market's acting this way and maybe more importantly, what it actually means for you, whether you're thinking of buying, selling or just, you know, watching the economy.

Speaker 1:

So the big picture right now, the US housing market. You could almost describe it as a standoff right. It feels largely frozen.

Speaker 2:

That's a good way to put it, frozen or stuck, maybe.

Speaker 1:

Yeah, because you've got these two big forces pushing against each other. First, those stubbornly high mortgage rates. They're sort of hovering between 6.7% and 7%.

Speaker 2:

Right around there, yeah, which definitely keeps buyer demand pretty low, historically speaking.

Speaker 1:

But then, countering that, there's this incredibly powerful lock-in effect. It's stopping a flood of homes from even coming onto the market. It's like a tug-of-war.

Speaker 2:

A real stalemate.

Speaker 1:

You know, I saw this statistic and it genuinely blew me away. Over 60% of American homeowners they have a mortgage rate below 4% 60%.

Speaker 2:

It's an amazing number.

Speaker 1:

I mean, just think about that for a second. What does that tell you about why this market is so well unique right now?

Speaker 2:

It's really the heart of that standoff you mentioned. What's fascinating here is how this tension, you know, low demand because of high rates, but also super low supply because people won't give up those amazing old rates Understandably, exactly, understandably unwilling, it creates a market that's cooling, yes, but not crashing, and that distinction is crucial.

Speaker 1:

Explain that a bit more Cooling, not crashing.

Speaker 2:

Well, a crash implies prices falling rapidly across the board. What we're seeing instead is prices mostly flatlining, maybe dipping slightly in some areas, activity slowing way down, but no plummeting, and that's precisely because so few homes are actually being listed for sale. It's a slowdown, a deep freeze maybe, but not quite a collapse.

Speaker 1:

And the numbers. They really do bear that out, don't they? Let's look at prices first. The median home price. It's up just what 0.5% to maybe 1.7% from last summer.

Speaker 2:

Barely moving, yeah.

Speaker 1:

That's the softest price environment we've seen in years, really A huge change from the pandemic jumps.

Speaker 2:

And it's worth adding context there Wages have actually gone up what over 4% in that same time.

Speaker 1:

Right. So in real terms, homes are actually slightly more affordable technically than a year ago Still expensive, mind you, but slightly better relative to income.

Speaker 2:

Small silver lining perhaps.

Speaker 1:

But OK. While prices are plateauing, that's only one side of it. What about supply, the number of homes actually for sale? Because that's where we're seeing another big shift.

Speaker 2:

We are finally seeing inventory return, which is key.

Speaker 1:

Yeah, the number of single family homes listed is up 32% from last year. It's a pretty solid jump.

Speaker 2:

It is. It brings us closer towards, you know, pre-pandemic levels. We're talking around 826,000 single family homes on the market mid-June.

Speaker 1:

So that extreme housing shortage we kept talking about, yeah, it's easing up.

Speaker 2:

It is easing, thankfully. What's really interesting about that 32% jump, though, it's not just the number itself, it's what it suggests about maybe seller psychology finally starting to shift a bit from that frenzy era.

Speaker 1:

Good point.

Speaker 2:

For so long there was nothing for sale. Now homes are starting to kind of trickle back, but and this is a big but- Always a but. Right. Even with that inventory, increase actual sales. Existing home sales are still incredibly slow, like hovering around a 30 year low, 30 yearsyear low 30 years. Yeah, so it just confirms you know the days of homes flying off the market in a single weekend. Those are definitely gone for now.

Speaker 1:

So this raises an important question then what does all this mean for the balance of power between buyers and sellers?

Speaker 2:

That's exactly where this leads. It feels like that balance is finally shifting, moving away from that extreme seller's market we got so used to.

Speaker 1:

Okay, how so that expanding inventory, the 32% increase? How's that playing out on the ground?

Speaker 2:

Well for one, homes are staying on the market longer. The typical home now sits for about 40 days.

Speaker 1:

And that's up from last year.

Speaker 2:

Yep up five days from last year Gives buyers a bit more breathing room.

Speaker 1:

And price adjustments. Are we seeing more of those?

Speaker 2:

Definitely. About 40%. 0% of homes listed have had at least one price reduction 40%, that's high. It's a rate we haven't seen in like 15 years. It tells you sellers are having to be more realistic.

Speaker 1:

And it's not just price cuts, right. You mentioned sellers offering concessions too.

Speaker 2:

Yes, that's becoming much more common. Nearly half of sellers are providing some kind of incentive.

Speaker 1:

Like what kind of things?

Speaker 2:

Things like helping out with closing costs or maybe doing a mortgage rate buy down where they basically pay points to lower the buyer's interest rate for the first year or two.

Speaker 1:

Ah, okay, Buying down the rate that can make a difference with these high rates.

Speaker 2:

It absolutely can. So the practical implications of all these shifts they're pretty significant for you the listener. If you're a buyer, this patience in the market, the growing inventory, it means more choice and, crucially, more room to negotiate.

Speaker 1:

So potentially a better deal.

Speaker 2:

Potentially yes, as homes sit longer and sellers get more willing to deal. It's just a different ballgame Now. For sellers, it really means you need a different strategy.

Speaker 1:

Right, can't just list high and expect multiple offers over asking anymore.

Speaker 2:

Largely no. Realistic pricing right from the start is key now, and being prepared for some proper negotiation, maybe including those concessions.

Speaker 1:

It's essential. It really sounds like a market that requires more patience, more strategy from everyone involved.

Speaker 2:

Exactly Thoughtful decisions over rushed ones.

Speaker 1:

Now we've been talking national trends, but it's always a case of location, location, location, isn't it? This isn't happening uniformly everywhere.

Speaker 2:

Oh, absolutely not. The housing market is definitely not a monolith. There are significant regional differences. I mean, think back a couple of years. Places like Boise, idaho, were white hot. Totally different story there now, compared to, say, parts of the Northeast.

Speaker 1:

Right. So where are we seeing the biggest variations?

Speaker 2:

Well, look at some of those Sunbelt markets parts of Arizona, florida biggest variations. Well, look at some of those sunbelt markets parts of Arizona, florida, texas for example places that saw a lot of new construction or maybe high investor activity. Okay, what's happening there? In some of those areas, inventory has actually climbed back up to or even above pre-pandemic levels. Wow, above yes, and as a result, prices there have stabilized or in some cases even dipped slightly year over year.

Speaker 1:

Do we have specific examples, states where prices are actually down?

Speaker 2:

Yeah, as of mid-2025, prices were below 2024 levels in a few places Hawaii was down about 3.8 percent, iowa down 2.0 percent, arizona down 1.6 percent, georgia down 1.3 percent and Florida down 1.2 percent. Small dips, but still down.

Speaker 1:

OK, so that's the Sun Belt. Some cooling there. What about other regions like the Midwest or the Northeast?

Speaker 2:

Those regions tend to have relatively tighter inventories still. So, while price growth has definitely slowed down, it's generally still positive, albeit subdued, less dramatic cooling there.

Speaker 1:

It really is like different microclimates within the same country.

Speaker 2:

Perfectly put. And if we connect this back to the bigger picture, especially in those Sunbelt areas, new home construction is playing a really significant role in boosting that supply.

Speaker 1:

The builders right.

Speaker 2:

The builders have really ramped up activity. New single family home sales are actually running above their pre-2020 averages.

Speaker 1:

Interesting. Are they doing anything differently?

Speaker 2:

Yes, many are offering incentives, just like resale sellers, rate buy downs, closing cost help, and they're also focusing a bit more on building slightly more affordable homes, maybe smaller footprints, and that's helped narrow the price gap that existed for a while between brand new homes and existing homes. This new supply is a key reason inventory is up overall and it definitely takes some pressure off.

Speaker 1:

So, putting all this together, the flatlining prices, the returning inventory, the regional differences, what does this actually mean for the near future, say the rest of 2025?.

Speaker 2:

What are the experts forecasting? Well, as you might expect with all these moving parts, the forecasts are a bit mixed. Generally, they point towards stability, but some see slight increases, others slight decreases. There isn't a strong consensus on direction, just that big moves are unlikely. Okay give us the range. Who's predicting what? All right. So on the side predicting slight declines, redfin for instance, they project a modest dip of about 1% nationally by the end of Q4 2025.

Speaker 1:

Okay, minus 1%.

Speaker 2:

Zillow is looking a bit further out, forecasting about a 1.7% drop in home values from spring 2025 to spring 2026.

Speaker 1:

Minus 1.7%.

Speaker 2:

And Morgan Stanley. Their base case forecast is for roughly a 2% decline in national prices for the full year 2025.

Speaker 1:

Okay, so Redfin Zillow, Morgan Stanley seeing small drops, but you said, others predict gains.

Speaker 2:

That's right. Jp Morgan, for example, they're forecasting a price gain of around 3% in 2025.

Speaker 1:

Plus 3%. What's their reasoning?

Speaker 2:

They assume basically that supply won't suddenly flood the market because of that lock-in effect and that the economy keeps growing steadily.

Speaker 1:

Makes sense. Who else sees gains?

Speaker 2:

Well, there was a survey of economists by Paulsonomics. Their average forecast was also around plus 3%.

Speaker 1:

Okay.

Speaker 2:

And then you have the big industry groups Fannie Mae, the Mortgage Bankers Association, mba, the National Association of Realtors, nar. Their projections are generally for modest growth, anywhere from, say, plus 1.3% to plus 4.1%.

Speaker 1:

Wow, okay, so predictions range from roughly minus 2% to plus 4%. That's quite a spread. How do we make sense of that for the average person?

Speaker 2:

It is a spread and it really highlights the uncertainty. But if you sort of synthesize all these different views, the prevailing takeaway seems to be a market that's likely to be flat to gently fluctuating.

Speaker 1:

So stable-ish.

Speaker 2:

Stable-ish exactly, Especially for the national average. Sure, some specific areas, maybe highly overvalued ones, could see bigger drops, but overall stability seems likely, mainly because that supply constraint, that lock-in effect, is so persistent.

Speaker 1:

And sales volume Still slow.

Speaker 2:

Sales volumes are expected to stay Pretty muted. Yeah, and mortgage rates Most forecasts see them staying roughly in the mid 6% range, maybe drifting slightly, but no big drops anticipated soon.

Speaker 1:

So the overall picture is stability, not dramatic change up or down. That's the key takeaway for you listening.

Speaker 2:

I think that's the most useful takeaway. Yes, A period of relative calm, maybe even stagnation, compared to the roller coaster of the last few years.

Speaker 1:

calm- maybe even stagnation compared to the roller coaster of the last few years. Okay, so for you, the listener navigating this market right now, it sounds like a definite shift in dynamics compared to that frantic pace. We remember Absolutely, if you're a buyer, that increased inventory home sitting longer. It means you likely have more choices, maybe more time to think and definitely more opportunity to negotiate Right those price reductions, the seller concessions.

Speaker 2:

They could really work to your advantage. Don't be afraid to ask.

Speaker 1:

And for sellers, what's the advice? It?

Speaker 2:

really boils down to adjusting expectations. Pricing realistically right from the start is probably more important than ever.

Speaker 1:

To avoid sitting on the market too long and having to do multiple price cuts later.

Speaker 2:

Exactly that can stigmatize a property and also be prepared for negotiations. Be ready to discuss concessions. You're not automatically in the driver's seat anymore in most markets.

Speaker 1:

So it sounds like, whether you're buying or selling, the current market really favors a more strategic approach Thoughtful decisions, not rushed ones.

Speaker 2:

That sums it up perfectly. Take your time, do your homework, understand your local conditions. Strategy is key right now.

Speaker 1:

So, to wrap up, it really feels like the US housing market is entering a period of maybe greater stability, a kind of recalibration after the craziness.

Speaker 2:

I think that's right. It's this interplay, isn't it? High rates, affordability, challenges, but also more inventory, yet held back by that powerful lock-in effect.

Speaker 1:

And all that is contributing to a market that's just far less volatile than it was. Activity is lower, yes, but a major crash, a widespread downturn, that's not what most experts are anticipating.

Speaker 2:

Joe, it seems more like a transition, a move towards maybe more sustainable, more, dare I say, normal market dynamics, Slower perhaps, but more balanced.

Speaker 1:

Yeah, perhaps.

Speaker 2:

And you know, this period of stability, especially with that lock-in effect seeming so sticky, it raises a really interesting long-term question for you to maybe ponder.

Speaker 1:

Oh, what's that?

Speaker 2:

How might this whole situation the high rates, the locked-in owners, the potentially slower pace of turnover how might that reshape our fundamental expectations about homeownership, about market activity, especially for future generations who might be navigating totally different financial landscapes?

Speaker 1:

That's a fascinating thought. How does the lock-in effect change the game long-term?

Speaker 2:

Exactly Something to keep an eye on, so we encourage you to continue watching those key indicators mortgage rates, inventory levels in your area and how different regions are performing. The story is definitely still unfolding.

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David (Viacheslav) Davidenko

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