Overview:
The U.S. housing market continues to send mixed signals halfway through 2025, as the economy and supply issues keep both buyers and sellers at a standstill still. Despite signs of economic resilience, home affordability remains at historic lows, driven by high mortgage rates, persistent inflation, and a national housing shortage.
Mortgage Rates Still High—But Stabilizing
Mortgage rates remain above 6.5% for a 30-year fixed loan, cooling what had been a hot market in 2021 and early 2022. While the Federal Reserve has paused rate hikes in recent months, rates are still well above the 3% mark seen during the pandemic. Home buyers who locked in low rates in 2020-2021 are reluctant to sell, creating what experts call the “rate lock-in effect,” which further tightens inventory.
“The Fed’s cautious stance has brought some stability to rates, but borrowing remains expensive by historical standards,” said Amanda Li, a senior economist at Redfin. “This makes move-up buying nearly impossible for many families.”
Inventory Crisis Drives Prices Up
One of the largest contributors to the ongoing affordability crisis is the lack of inventory. According to the National Association of Realtors, active listings are down nearly 30% compared to pre-pandemic levels. New home construction has not kept pace with demand, particularly in affordable and entry-level segments.
“There’s a structural shortage of several million homes in the U.S.,” said David Reyes, a housing policy analyst. “Even if interest rates dropped tomorrow, prices would remain high simply because there aren’t enough homes.”
Prices in many metro areas have either plateaued or slightly risen—especially in cities with strong job markets like Austin, Charlotte, and Raleigh. In other regions, especially parts of the Midwest and Sun Belt, modest price drops have brought some relief.
Renters Caught in the Middle
While home ownership remains out of reach for many, renters aren’t doing much better. Nationwide, rent growth has slowed from its peak in 2022, but remains elevated. In cities with limited housing supply and growing populations, rents are still climbing faster than wages.
Millennials and Gen Z—two generations now dominating the rental and first-time buyer markets—are increasingly burdened by student debt, stagnant wages, and high cost-of-living pressures, leaving little room to save for a down payment.
Investors Still Active—But Shifting Focus
Institutional investors have cooled their activity compared to their aggressive acquisitions in 2021–2022. However, they remain influential players in markets with high rental demand. Increasingly, investor focus is shifting from single-family homes to multifamily developments and build-to-rent communities, where demand is seen as more stable.
Outlook: A Stalemate or a Turning Point?
The remainder of 2025 may be shaped by several key factors: potential Fed rate cuts later in the year, wage growth, and whether government efforts to boost housing supply take effect. But without a meaningful increase in inventory or a sharp drop in mortgage rates, the housing market may remain gridlocked.
For now, many Americans are stuck between homes they can’t afford to buy—and rentals they can’t afford to leave.
Tips for Staying Afloat
Adjust Expectations
Focus on needs (location, safety, size) over wants (finishes, luxury). Be open to cosmetic fixer-uppers in good locations that can be upgraded over time.
Get Pre-Approved
Secure a pre-approval letter and know your true monthly payment at today’s mortgage rates. This will define your real budget and strengthen your offer.
Buy for the Long Term
Only buy if you plan to stay at least 7–10 years. This gives you time to build equity and refinance when rates drop.
Consider Alternative Entry Points
Explore condos, town homes, or multi-family properties. Look into first-time buyer programs or shared ownership to
Explore New Locations
Look outside major metro areas. Mid-sized cities and growing suburbs often offer better value and long-term upside.
Watch for Refinance Opportunities
Buy now if the home fits, but keep an eye on interest rates so you can refinance if rates drop.
Think Creatively About Affordability
- Take on a roommate
- Buy with a friend or family member
- Use rental income to help qualify
Most importantly, stay realistic, stay patient, and stay informed!
Your home ownership goals are possible — just take the right steps.
More on Presence:
