Plunge in Existing-Home Sales Reaches Nine-Month Depth as Per Kiplinger Housing Forecast
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The U.S. housing market is bracing for a period of sluggish growth in 2025, as high mortgage rates, increasing inventories, and economic uncertainty take their toll.
Mortgage rates remain elevated, with a revised forecast predicting 30-year rates averaging around 6.7% for 2025. This keeps affordability low and depresses buyer demand. As a result, existing home sales are expected to fall to a 30-year low in 2025, with transactions projected to decline 1.5% annually to about 4 million, the slowest since 1995.
New home sales and construction are also slowing. In June 2025, new home sales dropped 6.6% year-over-year, with inventory rising and homes remaining on the market longer. The supply relative to sales (months’ supply) has increased, signaling a slower market. Single-family starts fell 4.6% in June.
Home prices are under downward pressure, with Zillow and other analysts forecasting home price declines around 2% in 2025. The rise in available homes and muted buyer demand gives buyers more bargaining power. Median new home prices dropped slightly year-over-year and month-over-month in mid-2025.
Economic uncertainty and tariffs add to supply chain and cost pressures in new construction. Increased costs and economic caution likely contribute to builders’ slower activity and reluctance to ramp up construction.
Zillow shows national average home values up marginally +0.3% over the past year but forecasts a near-term softening throughout 2025. Other major forecasts also signal a buyer’s market emerging with many homes selling below listing price and growing inventory.
In summary, the U.S. housing market in 2025 faces a combination of higher mortgage rates, elevated inventory, weaker buyer demand, and economic uncertainties that are expected to suppress home sales to very low levels, cause moderate declines in home prices, especially in some markets, and result in slower single-family home construction due to both weak demand and cost/tariff pressures.
This outlook marks a departure from the bullish pandemic-era housing boom to a more restrained environment dominated by affordability challenges and cautious market activity.
Financing a new house in 2025 might prove challenging due to high mortgage rates and a slower housing market. Investing in real estate might offer opportunities as low affordability and a buyer's market could lead to negotiating more favorable home prices.
