The U.S. housing industry has entered a transitional phase in the past 48 hours. Mortgage rates have trended down for most of 2025, currently hovering near 6 percent. This is a marked improvement over 2024s 7 to 8 percent rates, restoring some buyer power and improving affordability for those entering the market. As a result, household wages are rising faster, and monthly payments are lower than at their 2024 peak. Despite improved affordability, only 2.8 percent of homes have sold so far this year, making turnover historically low. The primary reasons are elevated home prices, higher-than-2021 borrowing costs, and millions of homeowners locked into low sub-5 percent mortgages. However, the so-called lock-in effect is loosening as more owners with over 6 percent rates enter the market due to life changes, causing inventory to rise month over month in 2025.
National housing inventory now increases monthly, and homes are spending more time on the market. The pace of home price changes has slowed, with national prices mostly flat. FHFA data for the third quarter of 2025 shows home prices up 2.2 percent year-over-year, but only 0.2 percent higher than the previous quarter. This trend is consistent across regions, though some markets are up 3 to 4 percent while others are down as much as 6 percent. Notably, supply is catching up: California, for example, reported a 3.2 month supply in October 2025, almost identical to pre pandemic figures but still far below historic peaks. Nationwide, price appreciation lags inflation, and real estate firms like Zillow and Fannie Mae forecast mild growth in 2026, between 1 to 4 percent.
Transaction volume remains subdued even as existing home sales nudged up 1.2 percent in October. Major market leaders have responded by expanding fee incentives for buyers, launching adjustable-rate mortgage options, and accelerating investment in build-to-rent and affordable housing segments.
Compared to previous years, the current market is healthier but slower, marked by moderation rather than boom or crash. Consumers and industry players face increased inventory, stable prices, and a shift back toward normalized bidding and sales timeframes. This gradual recovery signals a move toward balanced market conditions unseen since before the pandemic.
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