US Housing Market: Will Prices Come Down This Year?

By the end of last year, experts were expecting 2025 to mark a rebound of the U.S. housing market, with buyers’ demand boosted by the slightly slower pace of home price growth and rising inventory.

Over six months into the year, however, this forecasted scenario has failed to come to life. Instead, the U.S. housing market is in a bit of a slump, as growing inventory is piling up in the market without finding interested buyers, who are being kept to the sidelines by sky-high prices, elevated mortgage rates and growing economic uncertainty.

In light of these dynamics, experts have had to reconsider their expectations for the year—and it could be good news for homebuyers. Newsweek asked three real estate insiders what they think will happen in the U.S. housing market in the next six months.

Why Did Things Not Turn Out As Initially Expected?

A surge in inventory across the U.S, as it happened, was widely expected by experts. It was going to be the change that was finally going to loosen up the market a bit, giving buyers more options and bringing them back to the market.

And yet, buyers are staying put.

The number one reason behind the current housing market slump is that mortgage rates have not declined by as much as many expected last year, Realtor.com senior economist Jake Krimmel told Newsweek.

“Forecasters initially projected several rate cuts in 2025, but the Federal Reserve has held off for now, with the potential for the trade wars to negatively impact both inflation and the labor market,” he said.

“Even with the Federal Reserve’s rate cuts last September, mortgage rates have not budged,” Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors (NAR), told Newsweek. “If anything, mortgage rates have been rising recently, thereby squeezing housing demand.”

As of June 12, the 30-year fixed-rate mortgage was 6.84 percent, according to Freddie Mac.

High borrowing costs are making it harder for buyers to put away enough savings for a home, but properties are just too expensive even without considering a mortgage.

“Simply put, prices are still too high. Affordability has not improved enough to pull buyers back in, with persistently high mortgage rates weighing on demand,” Krimmel said. “Home prices haven’t dropped meaningfully, and buyer purchasing power hasn’t improved enough to drive a strong rebound in demand.”

Adding to these challenges are President Donald Trump‘s trade policies, Chen Zhao, head of economics research at Redfin, told Newsweek.

“Buyers are more wary now because macroeconomic policy has been more volatile than expected, and tariffs have been higher than expected. That means higher recession risk, and more buyers just want to wait and see how things land,” she said.

How Will the Standoff Between Buyers and Sellers Play Out?

With rising inventory and dwindling sales across the country putting downward pressure on home prices, buyers are gaining the upper hand in the market.

Nationally, median list prices essentially remained flat year-over-year in April, at +0.1 percent. But in many metros around the country, including Austin (-6.3 percent), Cincinnati (-6.2 percent), and Denver (-5.8 percent), prices are already falling.

“Sellers have indicated they are more willing to cut prices as well,” Krimmel said. “Homes are sitting on the market longer and price cuts are becoming more common. In May, 19 percent of home listings had price reductions—the highest share for any May since Realtor.com began tracking in 2016.”

But their advantage on sellers might not be as solid as it looks. While price cuts on listings are becoming more common, “it could also be the case that some sellers are holding out for a certain price and are willing to sit out this season if they can’t get it,” Krimmel said.

Many sellers are locked in to lower mortgage rates and might not be willing to give them up unless they can sell for a certain price. “In fact, new listings increased in May, but they had less momentum than we saw earlier this year which caused a seasonally uncharacteristic dip in new listings from April to May,” Krimmel said.

“If sustained, this could suggest that sellers are willing to sit this season out if conditions are not right.”

“Home buyers are in a better position than before. But many home sellers are not in a desperate condition or in need of making a forced home sale,” Yun said. “Mortgage default rates are near historic lows. Home sellers can be patient.”

Overall, the current dynamics unfolding in the U.S. housing market affect both sides. “A seller who holds out delays not just their own sale, but their eventual next purchase once they become a buyer in the market, thereby further suppressing housing market activity,” Krimmel said.

Will Prices Finally Come Down This Year?

Realtor.com expects listings to continue to grow nationwide, particularly in the South and West where inventories are already high, continuing to put downward pressure on prices.

These same markets—which include Phoenix, Tampa, Denver, Jacksonville and Austin—are already seeing the largest share of price cuts in the country. Over 28 percent of listings in these metropolitan areas had their original asking price slashed by sellers last month, according to Realtor.com.

By contrast, Krimmel said, the Northeast and Midwest, which remain more supply-constrained, with inventories still below prepandemic norms, are likely to see more price stability.

“The key for price changes will be to track growing inventory and time on market, especially relative to their pre-pandemic levels when the market was more balanced,” Krimmel said. “Markets with high inventory and longer time on market are more likely to see price corrections. Overall, we expect a slow rebalancing rather than a sharp correction—unless economic conditions shift more dramatically.”

Yun also said that buyers looking for a good place to buy should look at where inventory is rising quickly.

“Florida condominiums, for example, offer homebuyers a great opportunity to negotiate a lower price,” he said.

But any price drops should be viewed as temporary or short-lived, he warned.

“In areas where housing inventory is rising, it’s notable that a significant number of jobs are being added. Florida, the Carolinas and Texas are experiencing solid job gains,” he said.

“The market surplus can quickly shift to a market shortage if mortgage rates were to fall measurably, say from the current 7 percent to near 6 percent.”

According to Krimmel, that would probably not happen any time soon. “Mortgage rates are not likely to fall substantially, locked-in homeowners will gradually decide they need to move despite their own low rates, and economic uncertainty is not likely to be quickly resolved,” he said.

Redfin expects prices to fall by 1 percent year-over-year by the end of 2025. “But we don’t anticipate a larger price decline because many sellers will sit on the sidelines until the market is better,” Zhao said.