Key Housing Trends of 2025: Record-High Prices, Falling Mortgage Rates, and More
The year 2025 presented challenges for the housing market, with affordability issues persisting and the traditional homebuying seasons disrupted. Homeownership decreased, and sellers faced tough decisions like offering concessions or reducing prices. Political factors like tariffs and government shutdowns added to the complexity, making it a tough year for consumers.
Despite the hurdles, there were some positive developments. Wages rose faster than housing costs for the first time since 2016, and buyers started to adjust to 6% mortgage rates, which helped alleviate some of the rate-lock concerns.
Regional trends continued to play out, with the Sun Belt experiencing a slowdown while the Rust Belt remained attractive to buyers.
According to Daryl Fairweather, Redfin Chief Economist, high prices sidelined homebuyers while sellers also pulled back listings in response to weak demand, tightening the housing supply further. This dynamic contributed to maintaining high prices, and the affordability challenge is not likely to ease until there is an increase in homebuilding or a significant drop in mortgage rates.
Here are some key trends and data points that defined the housing market in 2025:
1. Record-High Home Prices
The median home sale price in the US reached a new peak of $446,000 in June 2025. Throughout the year, prices remained above the previous year’s levels, with each month surpassing the corresponding median sale price from 2024. On average, the 2025 median sale price was 1.7% higher than in 2024, amounting to around $7,400.
Affordability continued to be a major concern, especially with factors like tariffs, inflation, and higher mortgage rates affecting the economy. While there are predictions of price drops in the future, affordability remains a challenge, particularly in rural America where buyers need significantly higher incomes to afford homes.
Luxury home prices also surged in certain metros, reshaping the high-end segment of the housing market, especially in Sun Belt areas like West Palm Beach.
2. San Jose Tops as Most Expensive Metro
San Jose maintained its position as the priciest major metro area for homebuyers in 2025, with a median sale price averaging $1,617,659. The top six most expensive metros were all in California, with San Francisco following closely behind San Jose.
- House prices saw a general uptrend, with significant annual increases in cities like Cleveland, Pittsburgh, and Milwaukee.
Top Five Most Expensive Metros:
| San Jose, CA | $1,617,658 |
| San Francisco, CA | $1,522,535 |
| Anaheim, CA | $1,198,636 |
| Oakland, CA | $929,792 |
| Los Angeles, CA | $916,401 |
3. Detroit Leads as Most Affordable Metro
Detroit remained the most affordable major metro area for homebuyers in 2025, with a median sale price averaging $202,739. Despite price increases, Detroit’s affordability compared to the national average remained significantly lower.
However, affordability challenges persist in Detroit due to high poverty rates and low median incomes, leading to rising prices and limited housing options for marginalized groups.
- Low-cost cities are predominantly located in the Rust Belt, where competition is high, and prices are on the rise.
- Price declines were more pronounced in Sun Belt metros like Jacksonville, Oakland, and Dallas.
Top Five Most Affordable Metros:
| Detroit, MI | $202,739 |
| Cleveland, OH | $243,830 |
| Pittsburgh, PA | $250,250 |
| St. Louis, MO | $280,294 |
| Philadelphia, PA | $293,774 |
4. Sluggish Home Sales
An average of 424,078 homes were sold per month in 2025, similar to the previous year but lower than the peak in 2020. Existing home sales are expected to reach around 4.24 million in 2025, aligning with the figures from 2023 and 2024.
While year-over-year sales remained steady, there was a decline heading into 2026. Luxury home sales hit their lowest point in years, reflecting the overall market slowdown.
- May recorded the fewest home sales for the year at 416,400.
- Rust Belt and Southern regions saw an uptick in home sales, while Florida’s market continued to be sluggish.
- Ultra-luxury home sales remained stable, driven by wealthy buyers who were less impacted by economic factors.
Top Five Metros with Declining Home Sales:
5. Declining Mortgage Rates
Mortgage rates saw a gradual decline throughout 2025, averaging 6.6% compared to 6.7% in the previous year. The decrease in rates, although modest, contributed to cost savings for buyers, with further improvements anticipated in the future.
Despite some volatility, mortgage rates remained relatively stable throughout the year, responding to various economic indicators and events like tariff announcements and Federal Reserve meetings.
Projections suggest that mortgage rates will average around 6.3% in 2026.
6. Growth in Housing Inventory
Monthly housing inventory averaged 1.48 million listings in 2025, marking an 18.3% increase from the previous year. Although inventory initially rose, growth slowed as sellers grappled with pricing concerns and dwindling buyer interest.
Starter home listings bucked the trend and rose in tandem with sales, leading to rapid price escalations in certain markets, such as homes reaching the million-dollar mark in select metros.
- Inventory surged in competitive markets like the Sun Belt and coastal areas, while declining in Rust Belt cities with high demand.
Top Five Metros with Increased Inventory:
Top Five Metros with Decreasing Inventory:
7. Rise in Months of Supply
The average months of supply in 2025 stood at 3.5 months, up from 3 months the previous year. The increase signified a shift towards a more balanced market, although conditions varied regionally.
As the year progressed, inventory constraints led to fewer listings, reverting the supply levels back to a strong buyer’s market. Despite the challenges, some cities experienced rapid sales within a short timeframe.
8. Surge in New Listings
New listings saw a notable 6.8% increase in 2025, with an average of 565,578 homes listed each month. While this uptick translated into more sales, high prices deterred many potential buyers, leading to a drop in new listings towards the end of the year.
9. Lag in New Construction
The rate of new home starts remained stagnant in 2025, with an average of 1.38 million new homes initiated each month. The housing shortage, exacerbated by low construction activity, continues to pose challenges for prospective buyers.
Affordable housing remains a critical issue, with a significant gap in meeting demand across the country. Policy initiatives aimed at boosting affordable housing construction offer hope for addressing the crisis.
10. Inflation and Economic Uncertainty
Inflation played a central role in the economic landscape of 2025, influenced by various policy decisions and market factors. The rise of artificial intelligence also impacted the economy, driving stock market gains but raising concerns about an AI bubble.
11. Lengthening Time on Market
Homes spent an average of 48.5 days on the market in 2025, marking a slight increase from the previous year. The slowdown, particularly visible in former hotspots like Miami and Austin, highlighted changing market dynamics and shifting buyer preferences.
12. All-Cash Purchases and Investor Activity
All-cash purchases remained prevalent in 2025, accounting for 30% of home transactions. Investor activity, while stable, remained elevated compared to pre-pandemic levels, indicating continued investor interest in the real estate market.
13. Looking Ahead to 2026
The housing market in 2025 presented challenges and opportunities, setting the stage for what lies ahead in 2026. Redfin’s predictions for the upcoming year offer insights into potential market trends and developments. For a detailed outlook on the 2026 housing market, explore Redfin’s 2026 Housing Market Predictions.
To gain further perspective on the 2025 housing market and insights into the future, hear from Glenn Kelman, Redfin’s CEO, as he shares his thoughts on the past year and what to expect in 2026.