Over the past few years, homebuyers have navigated an increasingly uncertain housing market. Elevated home prices and stubborn mortgage rates have led many Americans to postpone their homeownership plans, hoping for more favorable conditions.
Ongoing housing gridlock and broader economic concerns have also muted buyer confidence, with experts predicting a slow-moving spring market.
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While housing inventory is finally rising, demand has remained weak, resulting in subdued home sales this year.
Growing economic uncertainty and constantly fluctuating mortgage rates have dashed many predictions that 2025 would see a strong housing rebound with renewed buyer demand.
Though housing performance for the second half of the year is still unclear, many experts predict it will face the same challenges plaguing the market since 2022.
Rising home prices, high mortgage rates, and a lack of affordability have diminished homebuyer demand. Real estate experts anticipate a tepid housing market through the end of 2025.
Image source: Bisping/Star Tribune via Getty Images
Economic uncertainty will diminish housing sales this year
Most Americans began adjusting their spending or financial plans in the wake of blanket reciprocal tariffs announced by the Trump Administration in April. Though many tariffs have been paused, consumers are still wary of making big purchases during an unpredictable time.
24% of Americans cancelled plans to buy a home or purchase a car after widespread tariffs were announced in April. The ripple effect of tariffs on inflation, interest rates, and the labor market are driving the fear that costs will go up across the board for most households.
Many housing experts believe the unknown around the economy will play a major role in consumer wariness for the foreseeable future.
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On the Q1 2025 Zillow earnings call last week, CFO Jeremy Hoffman noted that unpredictable economy will feed into housing market challenges.
“I think on the housing market front, it’s been challenged for a while,” Hoffman said. “We expect it to continue to bounce along the bottom. This has been the environment we have been operating in since 2022. And we expect more of the same in 2025.”
“Given volatile macro and interest rates expected to remain elevated, we expect housing volumes will likely remain subdued through the remainder of the year,” he continued.
Lack of affordability is creating a sluggish housing market
Homebuyers have noticed diminished buying power over the past few years as home prices rise with inflation and housing costs outpace wage growth.
One in four Americans spent over 30% of their income on housing in 2023, making it difficult for renters and buyers to sustain the rising cost of housing. As homeownership becomes increasingly unaffordable, buyers will continue to wait out the market in the hopes that it may turn around.
Related: Morgan Stanley predicts major mortgage rate changes are coming soon
Still, lower housing sales don’t necessarily mean lower housing demand. Zillow CEO Jeremy Waksman also highlighted long-term housing difficulties on the earnings call.
“What’s keeping transaction volumes down is the folks that have to pull the trigger,” he said. “That doesn’t mean the demand isn’t there. It just means that they’re not actually following through and able to buy.”
“That’s the affordability challenge, which is exacerbated by lack of inventory….So you’ll see that in the buy side signals,” he explained. “You’ll see that in the demand signals and our traffic and other companies that report on buy side demand. Even with the challenges in the outside for their wallet, right, the pent-up desire is still there.”
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