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nventory rose in 2025, yet affordability hurdles kept buyers at bay and weak selling conditions kept homeowners from listing. Real Estate News highlighted the year’s key players—The Ten—based on industry impact. The U.S. economy faced tariffs, AI investment surges, and immigration crackdowns, shaking consumer confidence, but the housing market largely met economists’ forecasts: it stayed “stuck,” with modest gains.
Existing‑home sales are expected to edge up slightly, but with about 4.1 million transactions, 2025 will rank among the lowest in three decades. Inventory climbed, though the pace slowed recently. Home‑price growth decelerated, lagging inflation in most markets. 30‑year mortgage rates hovered above 6%, ranging from 6.2% to 6.4% in the year’s final months after spiking past 7% early on.
Why the market stagnates? Affordability and mobility are the main culprits. Lisa Sturtevant, Bright MLS chief economist, notes that fundamentals remain strong, yet affordability will dominate for years. Median prices, still inflated from pandemic highs, stay out of reach for many, and even the most buyer‑friendly markets haven’t seen meaningful price drops.
Mobility is also constrained. 2025 saw low hiring and firing, especially in the private sector, reducing job‑related moves. More than half of current mortgage holders are locked into 30‑year rates below 4%, with ample equity. Sellers often stay put to avoid taking on higher rates, as First American’s Odeta Kushi explained: “Selling a home with a 3‑ or 4‑percent mortgage to take on a higher rate would raise monthly costs dramatically.” This lock‑in effect has pushed sales volumes to 75% of 2020 levels, a trend that could persist through 2027, per Cotality analysis. Cotality’s Thom Malone added that low‑rate homeowners “hunker down and wait out the downturn” rather than adjust prices.
However, the lock‑in is weakening. Mike Simonsen, Compass chief economist, reports that nearly 20% of mortgages now carry rates above 6%. Those 10 million homeowners are no longer bound to historic lows and can move when needed.
Inventory increased as those forced to sell entered the market, but many homes linger longer due to insufficient price cuts. Some sellers opted to rent out rather than lower asking prices, leading to thousands of homes being removed from the market in the second half of 2025.
The luxury segment fared better, with higher sales and prices, reflecting the “K‑shaped” economy: high‑income buyers thrive while the broader market lags. Simonsen noted stark regional differences, with Northeastern markets diverging from the South and Sun Belt.
Looking ahead, most economists anticipate a reset in 2026. Forecasts predict a rise in home sales, though the magnitude is unclear. Mortgage rates are expected to decline, while prices should largely remain flat. Mischa Fisher, Zillow chief economist, says buyers will benefit from increased inventory and improved affordability, while sellers will enjoy price stability and steadier demand—offering both sides a bit more breathing room in 2026.
