Home listing prices in the U.S. have surged to record levels, hitting $698 billion—a 20.3% increase from last year—according to real estate firm Redfin. This sharp rise is being driven by a mix of higher home-sale prices, expanding inventory, and slowing buyer demand.
Sellers Struggle as Buyers Pull Back
With more homes entering the market than buyers can absorb, Redfin’s chief economist Daryl Fairweather suggests a shift in market dynamics may be approaching. She told FOX Business that while sellers are listing homes at steep prices, many buyers are stepping back due to high costs from mortgages, insurance, and taxes. As a result, homes are sitting longer on the market, forcing sellers to consider price cuts or withdraw their listings altogether.
Fairweather emphasized that many homeowners—especially those who bought before rates rose—must now accept that market conditions have changed. Lowering prices may be necessary to close a deal.
Inventory Surge Challenges Seller Expectations
Noel Roberts, founder of Pending, a real estate firm focusing on off-market sales, noted that the market is now favoring buyers more than before. Housing inventory increased by 16.7% in April, reaching a five-year high. That’s largely because more homeowners are choosing to sell amid economic uncertainty, despite previously holding off due to the so-called “mortgage rate lock-in” effect. Homes are also staying on the market longer, and a growing portion has been listed for over two months.
According to Roberts, scarcity no longer benefits sellers the way it used to. They now need better pricing strategies and targeted marketing to attract buyers. But for buyers, this shift offers a chance to negotiate better deals, especially in submarkets where competition has eased.
Buyers Have More Bargaining Power
Roberts believes that this could be the first real opportunity in years for buyers to get favorable terms on a home. Instead of getting caught in bidding wars, buyers can now evaluate listings with more leverage. He stressed the market isn’t in a crisis—just undergoing a transformation. Sellers who adjust will still sell, and buyers who remain active can find value.
Low Mortgage Rates Lock Sellers In
One key reason for the disconnect between buyers and sellers is mortgage rates. As of February, 82.8% of homeowners with a mortgage had locked in rates below 6%, while the current average 30-year fixed mortgage rate is about 6.85%. This keeps many sellers from listing unless they expect a high return. Still, Redfin reports this “lock-in effect” is easing as some Americans accept higher rates or need to move for other reasons.
Fairweather added that sellers will still fetch decent prices—just not at the levels they may have hoped. Many will likely lower prices simply to close sales.
Home Affordability Out of Reach for Most
Another major challenge is affordability. According to Realtor.com’s April Housing Trends Report, the income needed to buy a median-priced home is now $114,000—up from $67,000 six years ago. Yet, the U.S. median household income in 2023 was just $80,610. In fact, 57% of households can’t afford a $300,000 home, per the National Association of Home Builders.
How Did We Get Here?
The crisis stems from a housing supply shortfall. Since the 2008 financial crisis, developers have built far fewer homes than needed. The U.S. now faces a deficit of around 4.5 million homes. This lack of supply pushed buyers into fierce competition, which drove prices up over the last six years.
Unfortunately, the construction slowdown continues. In April 2025, only 1.36 million new homes began construction—down 1.7% from last year. High interest rates make it harder for builders to finance projects and for buyers to afford mortgages.
Some Hope for Buyers in Price Drops
Still, there’s a silver lining. Realtor.com notes that homeowners in some areas are starting to meet buyers halfway with price reductions. Inventory is building in pricey cities like San Diego, San Jose, and Washington, D.C., with listings rising over 67% year-over-year. Nationwide, active listings climbed 30.6% in April, and 18% of them saw price cuts.
This increased inventory may give qualified buyers the chance to find deals—especially if they act strategically and work with experienced realtors.
Record Inventory, But Sales Still Sluggish
Despite an all-time high of $700 billion in listed homes and the most inventory in five years, demand remains soft. Redfin reports that 44% of listings—worth $331 billion—have been on the market over 60 days, the highest share since 2020.
Prices continue to inch up, with a 1.4% rise in April even as inventory surged 17%. Mortgage rates remain stuck near 7%, keeping many buyers away. Goldman Sachs expects only a minor drop to 6.75% by year’s end.
Uncertainty Weighs on the Market
Earlier predictions of falling interest rates in 2025 have shifted due to new economic pressures, including the uncertainty around Trump’s trade policies. The Fed is now expected to cut rates only by September. Consumer sentiment remains shaky, and this broad economic unease is suppressing housing demand.
Redfin’s head of economic research, Chen Zhao, explained that market volatility is making borrowing more expensive and pushing mortgage rates higher, further dampening demand.
The Bottom Line
The U.S. housing market in 2025 is far from stable. While rising prices and growing listings suggest change, high mortgage rates and affordability issues are keeping many buyers on the sidelines. Still, in certain cities and situations, buyers willing to act now may find rare opportunities for favorable deals.
