The US housing market has shown signs of slowing down in 2025, despite two years of its worst performance since the 1990s. Existing home sales decreased by 4.9% in January, reaching an adjusted rate of 4.08 million. The National Association of Realtors attributed this decline to increasing inventory and lower mortgage rates.
Inventory levels rose 16.8% year-over-year in January, offering more homeowners the opportunity to sell their properties. However, unsold inventory remains below the five- to six-month supply mark, indicating that buyers still face challenges in the market.
The median existing home price increased by 4.8% from last year, reaching $396,900. This rise has made it difficult for first-time buyers and low-income families to afford homes, with many needing to spend over 40% of their income on mortgage payments.
Mortgage rates have remained high, at 6.85%, which is affecting the market for newly built homes and increasing construction costs due to tariffs. The Federal Reserve has been skeptical about cutting interest rates, citing concerns about inflation and the impact of trade policy.
The home insurance and property tax markets are also experiencing increased costs, driven by natural disasters and rising sales prices. These expenses add to the financial burden on homeowners and may limit their ability to sell or upgrade their properties.
While some economists predict that mortgage rates will drop in the future, Jerome Powell, the Federal Reserve chair, stated that normalization of policy is necessary to address high insurance costs, material costs, and labor shortages driving up housing prices.
Source: https://13wham.com/news/nation-world/housing-markets-slump-extends-into-2025-as-affordability-issues-persist-mortgage-rates-construction-tariffs-economy-real-estate