US Housing Market & Mortgages: Will Prices and Rates Come Down This Year?

As we move into the second half of 2025, America’s housing market stands at a critical intersection. Across the country, rising inventory and dwindling home sales are finally applying long-absent downward pressure on prices. In many metros, homes are lingering longer on the market, and price reductions have become increasingly common. For the first time in years, it appears that buyers may be gaining the upper hand. But is this the beginning of a buyer’s market—or just an illusion created by seasonal shifts and structural dysfunctions?

The answer, like much of real estate, is more complex than it seems.

Inventory Is Rising—But Not Fast Enough

At a glance, the data looks promising for prospective homeowners. Inventory is rising in many markets, even in some of the country's most competitive regions. But the surge isn’t consistent or strong enough to create broad affordability relief.

A recent and telling example is the surprising dip in new listings between April and May—typically a period that sees increasing seller activity. Despite a rise in listings in May compared to last year, the slowdown from April indicates hesitation among homeowners. Many sellers appear willing to sit out the 2025 selling season entirely unless they can command top dollar for their homes.

This reluctance is tied directly to the so-called “lock-in” effect. During the pandemic and its aftermath, millions of Americans refinanced or bought homes with record-low mortgage rates—often under 3%. Now that average mortgage rates hover between 6.75% and 7.25%, many are unwilling to trade in their ultra-low monthly payments for significantly higher ones, even if it means moving to a more desirable home.

As a result, while inventory is up year-over-year, it’s still far below pre-pandemic levels. And with sellers cautious and mortgage rates elevated, the housing market remains stuck in a holding pattern—offering neither a clear path to affordability nor any dramatic price collapse.

The Buyer’s Market That Wasn’t?

While it’s true that price cuts are becoming more frequent, they’re not necessarily translating into significant price declines on a national scale. In fact, some markets—especially those that remained resilient through the 2021–2023 boom—are still experiencing home price growth, albeit modest. According to Zillow and Redfin, cities like Miami, Charlotte, and parts of the Midwest are bucking the broader cooling trend.

However, in metros that saw explosive growth during the pandemic, such as Boise, Austin, and Phoenix, we are beginning to see the other side of the cycle. Price reductions there are more substantial, with some homes selling for up to 10% below peak pandemic highs.

Still, even in those metros, affordability remains a massive hurdle. Home prices may be adjusting, but so far they haven’t come down far enough—or fast enough—to offset the impact of persistently high mortgage rates.

Mortgage Rates: The Fed’s Stranglehold on Affordability

At the heart of the affordability crisis is the Federal Reserve’s policy on interest rates. On Wednesday, Fed Chairman Jerome Powell announced that rates would remain unchanged, in line with Wall Street expectations. But this decision drew sharp criticism from both political and industry voices.

One of the most vocal critics was Bill Pulte, the director of the Federal Housing Finance Agency (FHFA) and the current chairman of Fannie Mae and Freddie Mac. Pulte lambasted Powell’s refusal to cut rates, arguing on social media that the Fed’s tight policy is “kneecapping” the housing market and worsening America’s affordability crisis.

Pulte has gone as far as suggesting Powell resign if he won’t act swiftly to reduce rates, pointing out that high borrowing costs are suppressing housing demand, limiting mobility, and deepening inequality. He contends that Fannie Mae and Freddie Mac could play a more proactive role in expanding homeownership—if only rates were lower.

While Pulte’s rhetoric is dramatic, he’s not alone in his concerns. Many economists argue that the fight against inflation—which has now cooled considerably—no longer justifies such punitive borrowing costs. With inflation falling closer to the Fed’s 2% target, critics say that current policy disproportionately harms lower and middle-income Americans, especially first-time buyers already facing historically unaffordable housing prices.

Real Estate Is Local—But the Pressure Is National

What complicates the national conversation is the inherently local nature of real estate. While some areas are softening quickly, others remain overheated or have resumed upward trajectories due to strong labor markets and tight supply.

For instance, California’s coastal cities continue to struggle with severe supply shortages, even as affordability collapses. Meanwhile, places like Tampa, Dallas, and Atlanta are witnessing more noticeable slowdowns, with rising days on market and a growing number of price adjustments.

However, even in these cooling areas, the balance is fragile. A meaningful drop in mortgage rates—say, below 6%—could reignite demand and push prices back up before any real correction occurs. Conversely, if rates stay high and sellers continue holding out, the market could stagnate further, driving more potential buyers into the rental sector or out of the market altogether.

What’s Next for 2025?

So, will prices and rates come down this year?

Mortgage rates are unlikely to see a major drop until the Federal Reserve is confident inflation is under control—and even then, cuts may come slowly. Most economists now expect a single rate cut in 2025, possibly as late as Q4, depending on labor market data and inflation trends.

Home prices, on the other hand, may soften modestly in select markets, particularly those that overheated during the pandemic. But a national crash appears unlikely, largely because supply remains too tight and most homeowners are not under financial duress.

In short, buyers may see more negotiating power this year—but they shouldn’t expect miracles. Unless something forces sellers to flood the market or the Fed reverses course dramatically, affordability will likely remain constrained for the foreseeable future.

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The U.S. housing market in 2025 is a paradox: prices are under pressure, but not collapsing; rates are high, but not climbing; buyers have leverage, but not real power.

In the end, the market may shift only when the Federal Reserve acts decisively—and until then, the tug-of-war between buyers and sellers will continue. For now, patience and strategic positioning are the most valuable assets for those navigating America’s housing maze.

Schedule your appontment with me by clicking here. Together we will evaluate your personal housing goals.

Warm regards,

Sharon, Your Safe Money Lady™

Sharon Ben-David

Phone: (954) 261-5200
Licensed Mortgage Broker, Certified Professional Retirement Planning Adviser, and Financial Advocate

Protecting Your Nest Egg, Inc.

NMLS #2308601