Economists predicted that the United States would break free of its long-running housing slump in 2025. But the opposite happened.
As 2025 began, the stars were aligning for a housing market rebound. Inflation was easing, the economy looked strong and mortgage rates were drifting downward. By April, there were more available homes to buy than at any time since January 2020, according to the Federal Reserve of St. Louis.
The conditions were ripe for buyers to re-emerge, checkbooks in hand, and sellers to negotiate.
Tariffs Trigger a Turn
Then on April 2, President Trump rolled out his expansive global trade tariffs, “shocking the stock and bond markets and sparking fears of a recession.” Mortgage rates jumped again, hitting 6.89 percent for a 30-year fixed-rate loan on May 29, their highest level since early February. The extreme volatility threw cold water on a fragile market. Buyers bailed out.
“There isn’t any urgency to buying right now — if anything it feels more risky to put a down payment into a home when you might not have a job six months from now,”
— Daryl Fairweather, chief economist of Redfin
Stuck Between High Prices and Higher Risk
Real estate agents across the country report a chilled environment, with sellers unwilling to lower their prices and buyers reluctant to make a big purchase. Even in markets where prices have fallen and inventory is piling up, like Austin, Texas, homes are sitting on the market for months.
In highly competitive markets like the New York City suburbs, homes that would have gotten a dozen offers a year ago now get two or three.
“Yes, there is more inventory, but it’s almost like too little too late,”
— Selma Hepp, chief economist for Cotality
Fewer Sales, Higher Prices
In 2024, there were fewer home sales than in any year since 1995. This year is looking worse. According to the National Association of Realtors:
- April 2025 home sales dropped 2 percent from April 2024
- The median sale price rose 1.8 percent, marking 22 straight months of year-over-year price growth
- Pending sales are down from a year ago in every region of the country except the Midwest
Redfin data also showed:
- An increase in the number of canceled sales
- Nearly 500,000 more people trying to sell homes in April than people trying to buy — the biggest such gap since Redfin began tracking the data in 2013
Buyers Pull Back Amid Uncertainty
“They used to be content, thinking their jobs are going to be there, but it’s not the same anymore,”
— La’Keshia White, real estate agent in Douglasville, Ga.
White noted that some of her prospective buyers dropped out of the market after losing federal jobs. Others scaled back budgets due to fears of economic instability.
In Lewisburg, W.Va., Leah and Jesse Jones paused their search for a three-bedroom home after losing two bids. After six months of looking, they gave up — at least for now.
“I feel like buying a home, owning a home, is becoming a privilege that only the truly wealthy can enjoy,”
— Leah Jones, 45, a clinical dietitian
Locked-In Rates Freeze Sellers
Despite a market full of reluctant buyers, sellers are not under pressure to drop their prices.
“Almost 60 percent of households have an interest rate below 4 percent,”
— Journal of Finance study
Selling now means trading a low mortgage rate for a much higher one on a new purchase. Not since the 1980s have so many Americans been locked into their mortgages, said Lu Liu, assistant professor of finance at the Wharton School.
“There is no panacea in sight,”
— Dr. Liu
Supply Shortages Continue
The country hasn’t built enough homes since the foreclosure crisis. Even cities like Austin, which started construction on 102,000 single-family homes between 2020 and 2024, are seeing homes linger on the market.
“Sellers are not ‘refusing to sell,’”
— Eric Bramlett, Austin real estate agent
“But are instead ‘stuck on their price.’”
Despite an 18 percent drop in median sale price from its April 2022 peak, buyers still see Austin as overheated, remembering that prices jumped 69 percent from April 2020 to April 2022.
“It’s a bit of a frozen market,”
— Eric Bramlett
Some Homeowners Choose to Wait
John Huffman and Nan Walsh listed their East Austin home for $950,000 after buying another home in Columbus, Ohio. The house hasn’t sold. They’ve dropped the price to $925,000 but remain in no rush.
“I don’t feel any pressure,”
— John Huffman, 68
The couple paid $618,000 for the home in 2017 and hold a 2.6 percent interest rate on their mortgage. If they don’t get their price, they’re willing to rent it out — or keep it as a winter getaway.
