After years of soaring costs, the U.S. housing market is showing signs of a cool-down as rising inventory and high mortgage rates dampen demand, potentially setting the stage for a modest nationwide price drop by late 2025.
At a Glance
- Redfin forecasts a 1% decline in home prices by Q4 2025
- Sellers now outnumber buyers for the first time since 2013
- Mortgage rates remain elevated, hovering around 6.9%
- Just 28% of homes now sell above asking price, down sharply from 53% in 2022
- Builders are offering incentives like rate buydowns amid buyer hesitation
Buyer Power Rising as Market Shifts
According to Redfin, the balance of power in the U.S. housing market is shifting as inventory climbs and buyer enthusiasm falters. Homes are sitting longer on the market, fewer are selling above asking, and a record gap—nearly 500,000 more sellers than buyers—has emerged, marking the widest imbalance since 2013.
Watch a report: America’s Housing Inventory Surges Amid Slowing Demand
Modest Price Decline Expected
Redfin economists anticipate that home prices will fall roughly 1% year-over-year by the fourth quarter of 2025. While small, the drop reflects rising inventory, fewer bidding wars, and the psychological weight of high borrowing costs. Analysts emphasize this is not a crash, but rather a correction after years of unsustainable appreciation.
Homebuilders like Lennar are now slashing margins and offering mortgage buydowns to entice buyers who remain cautious in the face of affordability challenges.
Affordability Still a Major Constraint
Despite cooling prices, monthly housing costs still consume over 35% of household income for many Americans. Mortgage rates are expected to remain near 6.8–6.9% through the end of the year, limiting affordability and keeping some buyers on the sidelines.
While wages are gradually rising, the pace remains insufficient to fully counterbalance inflated housing costs. The market may be stabilizing, but for many would-be homeowners, relief still feels distant.
Let me know if you’d like a regional analysis or guidance on timing a home purchase during this transitional phase.
