Interest rates on mortgages have risen for the first time in several weeks.
In a significant development, the housing market is experiencing a power shift from sellers to buyers in 2025, primarily driven by rising home inventory and persistently high mortgage rates. This shift, while not indicating a housing crash, is a much-needed market stabilization.
### Factors Contributing to the Shift from Sellers to Buyers
After years of low inventory fueling bidding wars and rapid price increases, the supply of homes has significantly increased. This surplus has given buyers more options and bargaining power. In May 2025, there were 34% more sellers than buyers, creating a surplus of around 500,000 homes nationally.
Mortgage rates remain elevated, hovering around 6.5% to 7%, a consequence of Federal Reserve interest rate hikes from 2022 to 2024 designed to combat inflation. High borrowing costs have priced many potential buyers out of the market, reducing demand and forcing sellers to lower prices or offer concessions to attract buyers.
The market is undergoing a rebalancing after years of aggressive seller dominance with bidding wars and homes selling for above listing price. Now, homes are staying on the market longer, and sellers are more willing to negotiate on price and terms.
Geographic variation exists, with some markets like Miami, West Palm Beach, and Austin firmly in buyers' favor due to a high surplus of sellers. Others, such as Newark, NJ, still favor sellers due to low inventory and strong demand.
### Impact of High Mortgage Rates on Affordability
Elevated mortgage rates increase monthly payments for homebuyers, reducing how much home buyers can afford. This has priced out many prospective buyers, decreasing the pool of active buyers and softening demand. With fewer buyers able or willing to pay peak prices, sellers are lowering prices and offering concessions to entice buyers, which benefits affordability indirectly.
### Summary Table
| Factor | Effect on Market | |--------------------------------|---------------------------------------------------| | Increased Housing Inventory | More choices, surplus of homes, buyer leverage | | High Mortgage Rates (6.5% - 7%) | Higher borrowing costs, reduced buyer demand | | Cooling Buyer Demand | Homes linger longer; sellers lower prices | | Geographic Variance | Buyer-friendly in some cities, seller-favored in others | | Seller Concessions | Price reductions and incentives improve affordability |
The Labor Department's report, released on Thursday, showed that employers added 147,000 jobs in June, which was above the estimate of economists polled by LSEG, who projected 110,000 jobs would be added. The report solidified the outlook for the Federal Reserve to leave interest rates unchanged for its fifth consecutive meeting later this month.
Despite ongoing affordability challenges in the housing market, home purchase and refinance applications are increasing, according to Freddie Mac. The average rate on a 30-year loan was 6.89% a year ago, while the rate on the 15-year fixed note averaged 6.17%. The probability of a 25-basis-point interest rate cut in July declined from 23.8% to 6.7% following the report's release.
However, the housing crisis deepens as 47 major metro areas now require homebuyers to spend more than 30% of their income. The shift in the housing market does not eliminate affordability challenges but does provide buyers with more time and negotiating power.
- The increase in housing inventory, along with persistently high mortgage rates, is contributing to a shift in the housing market from sellers to buyers.
- In the face of high mortgage rates and elevated borrowing costs, many prospective buyers have been priced out of the market, leading to reduced demand and offering buyers more options and negotiation power.
- The ongoing high mortgage rates are impacting personal-finance and real-estate investment decisions, as they increase monthly payments and decrease the amount homes buyers can afford.
- The shift from sellers to buyers is resulting in a rebalancing of the housing market, with sellers becoming more willing to offer concessions to attract buyers, such as price reductions and incentives, thereby improving affordability indirectly.
