In 2024, the U.S. housing market experienced a dramatic slowdown, with soaring mortgage rates driving home sales to their lowest point in almost three decades. The year was also marked by minimal housing inventory and rising inflation, making affordability an even bigger challenge for potential homebuyers. Halfway through 2025, the market outlook remains similar, but experts hope the 7% mortgage has stabilized and that buyers are ready to accept it as the new normal. Mortgage rates aren’t expected to increase, though they likely won’t decrease much, if at all, throughout the year either. However, there are some signs that new inventory will trickle into the market, buoyed by homeowners previously held back by the “lock-in” effect, afraid to reenter the market as they might not be able to get a better interest rate than their current home. The question remains for buyers and sellers who spent the past year on the sidelines: “How is the housing market right now?” We’ve put together a comprehensive guide to help you understand the current housing market and what the future may hold.
From fluctuating home prices to a rebound in inventory and stubborn interest rates, these are the trends we predict could shape the housing market for the rest of 2025. A recession is looming According to HomeLight’s Q2 Lender Survey Report, 63% of lenders surveyed believe the United States is headed for a recession; as a result, home buying will become much tougher by the end of the year. “(It’s) definitely a mixed bag. Rates would come down, which would encourage buyers…those who have kept their jobs, anyway. But I doubt that will have any impact on the shortage of inventory that is out there,” Bill Staiger, a loan officer with more than 30 years of experience, said in the report. According to J.P. Morgan Chase, home prices are also expected to rise, which predicts a 3% rise by the end of 2025. Mortgage rates will remain high By the end of 2024, mortgage rates had settled into the 6.5-7%% range and experts expect these rates to hold for most 2025. In fact, 47% of loan officers surveyed by HomeLight said that the high interest rate environment is making it increasingly difficult to close deals. At the start of 2025, a 30-year fixed-rate mortgage averaged 7.04%, while a 15-year fixed-rate mortgage averaged 6.27%. As of June 2025, rates have dipped only slightly, down to 6.85% and 5.99%, respectively. While prospective homeowners have hoped that rates will drop, experts believe that the current rate environment will persist, and buyers will need to adjust. “They should decline some,” says Sam Khater, Freddie Mac’s Chief Economist, in comments to NPR. “But I think the new normal is 6 to 7% in this world of strong economic growth and steady inflation.”2025: Buyers and sellers feel the strain
