Real Estate Is Shifting—Here’s What You Need to Know
The U.S. real estate market is stuck between two gears: one foot on the brake, the other on the gas. While home values remain near record highs, the number of people buying and selling homes has dropped sharply. Why? Let’s break down the core shifts happening right now and what they mean for buyers, sellers, and investors.
1. Homeowners Are Locked In
Roughly 88 million Americans own homes, and 35.2 million of them are mortgage-free. For the rest, many are sitting on ultra-low interest rates from the pandemic era—think 3% or below. With current mortgage rates hovering around 6.7%, there’s little incentive to sell and buy again.
Result? Inventory is stuck. At current pace, some markets like Miami could take 40 years to absorb existing housing stock. That’s not just low—it’s gridlocked.
2. Demand Is There—Affordability Isn’t
Even though job numbers are strong—7 million more payroll jobs than pre-COVID—housing demand isn’t bouncing back the way it normally would. Weekly mortgage applications are flatlining. Existing-home sales remain at multi-year lows.
What’s holding buyers back? It’s not just prices. It’s payments. The median monthly mortgage payment (principal + interest) remains painfully high. Even with wage growth outpacing inflation (3.7% vs. 2.7%), the math still doesn’t work for millions of would-be buyers.
3. Mortgage Rate Dip Could Unleash Buyers
Here’s where things could shift. If rates drop from 7% to 6%, NAR economists predict:
550,000 additional home sales
1.6 million renters suddenly able to qualify for a mortgage
5.5 million more households with the income needed to buy
That’s a big deal. It means the Federal Reserve’s next few rate decisions will directly shape the market’s recovery.
4. Prices Are Cooling—but Not Crashing
Despite soft sales, home prices aren’t tanking. In fact, median home prices are expected to rise 1% in 2025 and 4% in 2026. That’s modest, but it shows stability.
Regionally, prices remain highest in the West ($647K) and lowest in the Midwest ($329K). But even in cheaper markets, affordability is tight.
5. 2026 Looks Better Than 2025
NAR’s forecast sees a weak 2025, then a bounce in 2026:
Existing-home sales: +3% in 2025, +14% in 2026
Mortgage rates: down to 6.0% by 2026
Home prices: steady climb
If you’re waiting for the bottom to fall out—don’t. This market isn’t crashing. It’s just stuck. But cracks are forming, and opportunity is coming for those ready to act when rates ease.
Bottom Line:
The U.S. housing market isn’t in a bubble or a free fall. It’s in a freeze. Mortgage rate movements—not price drops—will determine when things thaw. Until then, both buyers and sellers are playing a waiting game.
————-
Source: Yun, Lawrence. Real Estate and Economic Outlook: NAR Forecast Summit, July 16, 2025. National Association of REALTORS®, 2025. PDF presentation.
