Currently, the housing market has seen an increase in available inventory, returning to pre-pandemic levels. As of mid-June, there were 826,000 unsold single-family homes on the market, marking a 32% increase from the previous year. This surplus in inventory has led to a downward trend in prices, with demand remaining sluggish.
In contrast, due to the limited inventory caused by the pandemic, home prices surged in 2022, ending the year with a 6% increase over 2021. Although the beginning of 2023 was slow, home prices still managed to rise by 5%. Surprisingly, even with growing inventory, home prices continued to climb by 4% for the third consecutive year.
However, this trend has now slowed down. By mid-June 2025, national home prices have only increased by 0.55% compared to the summer of 2024. This makes 2025 the year with the softest home prices in recent memory.
As of June 6, 2025, 11 states have experienced home prices at or below their 2024 levels, including Hawaii, Iowa, Arizona, Georgia, Florida, Texas, Colorado, Alabama, Montana, New York, and South Carolina.
Recent data suggests a weakening momentum in home prices, particularly in the Sun Belt region, where inventory has increased significantly. It is anticipated that states like Tennessee, Utah, and Washington may follow suit in experiencing price declines.
While April data showed declines in home prices, it is essential to consider the broader economic context, including market fluctuations and consumer behavior. May saw a recovery in both home prices and the stock market, indicating a potential shift in the housing market.
Despite a slight recovery in May and June, there is a notable increase in the percentage of homes with price reductions on the market, signaling a challenging market for sellers. The overall sentiment suggests a cautious outlook for the rest of 2025.
The vibes are changing
According to recent polls and forecasts, there is a growing pessimism regarding home prices for the year. While economists remain cautiously optimistic, consumers are increasingly anticipating price declines in the housing market.
Despite these concerns, historical data suggests that home prices rarely decline on an annual basis. Homeowners tend to hold onto their properties rather than sell at a perceived loss, contributing to price stability in the market.
Looking ahead to the remainder of 2025, the housing market is expected to continue facing downward pressure on prices, particularly in regions with surplus inventory. However, with potential changes in mortgage rates and buyer demand, there is a possibility of modest price gains by the end of the year.