Yet sales remain near multi-decade lows. Buyers are squeezed by high mortgage rates, while sellers remain slow to adjust expectations.

Buyers are blocked by affordability. Sellers are losing leverage but refuse to budge. Builders are slowing construction despite a nationwide shortage of nearly 4 million homes. And across regions, markets look increasingly divided.

Every step toward progress seems to spark an equal and opposite reaction. More inventory makes conditions better for buyers, but economic uncertainty keeps many on the sidelines. Homes sitting longer on the market lead sellers to delist, slowing inventory growth. Builders face higher costs and weaker demand, pushing them to retreat, which only deepens the housing shortage. The result: a market in stasis, grinding through a difficult end of the year.

High Prices, Higher Rates

Who’s Unhappy: Buyers

Affordability challenges have arrived in two waves: first from rapid price appreciation, then from higher mortgage rates.

Between July 2019 and July 2021, the median list price jumped 18.6%. Thanks to low rates, the typical monthly payment rose only 9.2%. Since then, however, prices climbed another 16%, while payments surged nearly 60%—driven largely by rising rates.

From July 2022 to July 2025, rates increased further (5.41% → 6.72%), while the national median list price slipped only slightly ($444,000 → $440,000). That small price dip lowers payments by just $23 a month, while higher rates add $293—netting buyers an extra $270 per month, or $3,240 a year. Even in metros with steep price declines, like Austin (down 14.8% since 2022), monthly costs remain far above pre-pandemic levels.

Why it matters: Despite rising incomes, affordability remains near record lows. More inventory, longer days on market, and widespread price cuts haven’t translated into meaningful relief for buyers. The price-rate remains the biggest drag on sales.

Silver lining: Potential rate cuts could provide near-term payment relief, though renewed demand would likely push prices higher again. Rent growth has also cooled, easing pressure on renters. And homeowners locked into ultra-low mortgages continue to enjoy stable costs as they wait for conditions to improve.

Sellers Delist To Reassert Control

Who’s Unhappy: Sellers

Sellers are facing a market they haven’t seen in years. While more than one in five have cut asking prices, many others are simply walking away. The longer a home sits unsold, the greater the chance it gets delisted. In markets like Miami, Phoenix, and Riverside, as many as one in three new listings is offset by a delisting.

Why it matters: This retreat is slowing what had been steady inventory growth. New listings have declined each month since April. Just as the market has tilted slightly in buyers’ favor, stubborn or frustrated sellers are tempering supply and preventing sharper price declines. The result: fewer sales (pending sales are down year-over-year every month in 2025 so far) and continued affordability challenges despite softer demand.

Silver lining: Sellers in the Northeast and Midwest still benefit from strong demand and tight inventory. And unlike past downturns, today’s homeowners hold record levels of equity. Delisting, in effect, is a luxury—proof that sellers are not panicking and the market is far from distressed.

Builders Pump the Brakes

Who’s Unhappy: Builders

Instead of easing, challenges for builders have intensified. In June, the number of new single-family homes sold but not yet started hit a record high—up 19% year-over-year and 22% since 2022. This points to a growing backlog as builders hesitate to break ground in today’s high-rate, low-demand environment.

Why it matters: Builders are the clearest solution to the nation’s long-term housing shortage. Yet softer demand, falling prices, and a rising stockpile of existing homes make new projects less attractive, particularly in metros with abundant land and permissive zoning.

Silver lining: The housing shortage ensures that long-term demand for new homes will remain strong. Possible rate cuts could provide dual relief—stimulating buyer activity and lowering financing costs for builders. July data showed a modest uptick in housing starts, though permits (a forward-looking measure) fell 5.7% year-over-year, signaling ongoing caution.

A Housing Market Divided

Who’s Unhappy: Depends on Where You Live

The housing market is deeply split along regional lines.

• South and West: Supply has surged past pre-pandemic norms—by 50% to 70% in some metros. Demand is weak, homes linger longer, and prices are slipping.

• Northeast and Midwest: Inventory remains well below pre-pandemic levels. Homes continue to sell quickly—often faster than the national average—even with high rates and rising prices.

Why it matters: These regional divides make national averages harder to interpret. Looking only at the national data risks overstating weakness in the Northeast and Midwest while understating the correction happening in the South and West. In truth, the market’s challenges—and its solutions—are increasingly local.

Silver lining: Buyers in the South and West enjoy more favorable conditions than the headlines suggest. Sellers in the Northeast and Midwest still benefit from scarcity-driven demand, creating opportunities for builders in those regions as well. The divide clouds the national picture, but it also reveals where local opportunities lie.

A Market in Stagnation, Not Crisis

The housing market of 2025 is defined by frustration on all sides. Buyers face affordability barriers, sellers cling to peak-price expectations, builders hesitate to start new projects, and regional markets are drifting farther apart. What unites these struggles is the mismatch between expectations and reality.

That gap is understandable. Buyers, sellers, and builders are still influenced by the memory of sub-3% mortgage rates and 20% annual price growth—conditions that were never sustainable. Adjusting to today’s reality takes time, and in a slow-moving market, patience wears thin.

The reality, however, is not collapse but recalibration. Inventory is rising, builders will eventually deliver more supply, and easing mortgage rates will improve affordability. Sellers, too, will gradually adjust expectations. The progress is slow, but it is steady—and far less painful than the alternative of a sharp, sudden correction.

In short, today’s frustrations are signs of a market healing from extraordinary shocks. The path forward is uneven and regional, but the long-term trajectory points toward stability, not crisis.

How Real Estate Investors Can Benefit

While many buyers and sellers feel paralyzed, the current housing market creates unique opportunities for investors who know where to look. In the South and West, oversupply and longer days on market give investors leverage to negotiate deeper discounts and secure properties with built-in equity. Meanwhile, in the Northeast and Midwest, tight inventory and strong demand make rental markets especially attractive, offering steady cash flow and appreciation potential. As rates ease and sellers adjust, investors positioned with creative financing, value-add strategies, or buy-and-hold approaches can capture deals that frustrated retail buyers may overlook—turning market stagnation into long-term opportunity.