Over the past few years, homebuyers have faced a volatile and unpredictable housing market. With home prices remaining high and mortgage rates stubbornly elevated, many Americans have put their homeownership plans on hold, awaiting better market conditions.
Market stagnation and broader economic uncertainty have further dampened buyer confidence, leading experts to anticipate a sluggish spring season. While housing inventory is finally increasing, weak demand has kept sales subdued.
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Earlier hopes for a strong housing recovery in 2025 have faded as economic instability and fluctuating mortgage rates continue to dampen expectations of renewed buyer demand.
Although the outlook for the second half of the year remains uncertain, many experts predict that the ongoing challenges weighing on the market since 2022 will persist.
However, Redfin anticipates 2025 housing sales being a bright spot in an otherwise challenging housing market.
High mortgage rates and rising home prices have diminished homebuyer demand, but real estate experts predict significant housing price drops soon.
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Homebuyers will see housing price reductions for the first time in years
For the past few years, dwindling housing supply has fueled a competitive housing market, driving up demand and home prices with it. However, more sellers are listing their homes, and the time listings spend on the market is rising.
Experts expect home sales prices to stay flat in Q3 2025 and fall 1% year-over-year by Q4. Redfin economists found that there are 34% more sellers than buyers in the market, creating a surplus of over 500,000 homes.
This shift creates the strongest buyer’s market for the first time since 2013.
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Although buyers are regaining bargaining power, many homebuyers are still waiting on the sidelines, driving overall sales down.
Chen Zhao, Head of Economics Research at Redfin, notes that now is the time for hesitant buyers to take the plunge.
“We know there’s room to negotiate right now, so that’s the best way to take advantage of the changing market,” he said. “And the sooner you buy, the sooner you start to build equity.”
Mortgage rates will remain a roadblock to affordable housing through 2025
While inventory, list prices, and homebuyer negotiating power have improved, a crucial part of the housing formula has not.
Mortgage rates were initially forecasted to fall toward 6% by the end of 2025, but now that figure is shaping up to be closer to 7%. Redfin analysts expect mortgage rates to hover around 6.8% through the end of the year.
Related: Zillow CEO sounds alarm on concerning housing market trend
While many hoped for a more significant drop in mortgage rates this year, lower housing prices and greater buying power will still allow homebuyers to get a better deal than in recent years.
Zhao notes that mortgage rates are still high due to major economic concerns. He named “tariffs, which drive up the price of goods and discourage the Fed from cutting rates, and the rising U.S. budget deficit, which has caused analysts to downgrade the country’s credit.”
Buyers concerned about elevated mortgage rates may want to consider striking while the iron is hot and refinancing their mortgage when rates do eventually fall.
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