04/03/2025
Housing market fundamentals
Supply and demand are the primary drivers of the housing market. When supply — the inventory of homes available for sale — is down, prices tend to go up. Conversely, when there is a glut of inventory on the market, buyers have many choices, and sales prices often drop as sellers compete.
Other factors that play into the outlook include the state of the job market, consumer sentiment, fiscal policy, interest rates and inflation.
While most economists agree that the U.S. economy is strong, the housing market faces headwinds. Some buyers are hesitant to commit to a long-term mortgage when rates are hovering around the 7% mark, so they’re postponing a purchase in the hope that rates will drop later this year or next year. That reduces the demand for homes.
Those who either purchased or refinanced during the peak of the COVID-19 pandemic — back in 2020, when mortgage rates averaged 3.11%, or 2021, when they were 2.96%, according to LendingTree — are reluctant to sell and give up their low rates.
According to Redfin, homeowners are staying in their homes nearly twice as long as they did in 2005, a trend that’s driven largely by older adults planning to age in place.
And according to a Redfin survey released in January 2025, more than one-third of U.S. homeowners said they will never sell their home — further evidence of the constraints on the inventory of existing homes available for sale, and a factor that is likely to increase home prices further. Realtor.com forecasts that home sale prices will increase by 3.7% this year.
Despite the challenges, some positive signs are emerging. A Realtor.com monthly housing report released in January showed a promising change in seller activity, as the number of newly listed homes increased 37.5% month over month.
https://www.kiplinger.com/real-estate/housing-market-what-to-expect-the-rest-of-this-year
Most likely, mortgage rates will stay above 6%, and home prices will climb moderately. But that shouldn't dissuade buyers who are ready to make a move.