US Housing Market Shifts: Balancing Supply, Affordability, and Consumer Sentiment in 2025
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US Housing Market Shifts: Balancing Supply, Affordability, and Consumer Sentiment in 2025
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Active housing inventory has increased sharply, with available listings up 33.7 percent year-over-year as of early July. This marks the highest supply level since before the pandemic, due mostly to homeowners who once hesitated to sell at low pandemic-era rates now deciding to move on regardless of current mortgage rates. Single-family and condo listings are both seeing double-digit increases, with some markets experiencing as much as a 31.8 percent jump in available condos. The surge has shifted power toward buyers, who now face less competition and have more choice than at any point in the last four years. Sellers, on the other hand, are facing longer days on market and are being forced to price more competitively, especially in parts of the West and Sun Belt where prices have softened. In fact, prices in over half of the US states dropped during the first half of the year, and analysts expect a one percent year-over-year decline by the end of 2025.
Mortgage rates have finally started to decline after months hovering around seven percent. As of July 3, the average 30-year rate fell to 6.67 percent, its lowest since April. This drop is already influencing consumer behavior, with pending home sales up 1.8 percent in May compared to the previous month, a signal that actual sales may rebound in the coming weeks.
While demand is increasing, affordability remains the biggest challenge. Median prices are still rising in major cities, albeit at a slower pace than previous years. Supply chain issues and labor shortages are less severe than in 2023, but regulators are focused on affordable housing initiatives, given persistent weakness in overall affordability.
Industry leaders are adapting by offering more incentives to buyers and rolling out technology-driven solutions for streamlined sales and digital closings. Compared to prior quarters, today’s market is more balanced, but the path forward will depend on future moves by the Federal Reserve and further shifts in consumer sentiment.
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