The U.S. real estate market remained sluggish in 2025 for the fourth consecutive year, with home sales falling to their lowest level in three decades. The slowdown was driven by high home prices and rising borrowing costs, which pushed many potential buyers out of the market.
Home sales totaled 4.06 million units in 2025, similar to the 2024 figure, which was the lowest since 1995. With home prices continuing to rise by 1.7% to an average of $414,400, annual sales volumes have hovered around 4 million units since 2023—well below the long-term historical average of 5.2 million units.
Lawrence Yun, chief economist at the National Association of Realtors, described the year as difficult, citing record-high prices and weak sales. He noted a slight improvement toward the end of the year as price growth slowed and mortgage rates eased somewhat.
The downturn began in 2022, when mortgage rates rose sharply after the pandemic. This coincided with elevated prices and a shortage of housing supply due to weak construction activity, making homeownership increasingly difficult for large segments of the population.
Government measures have been proposed to improve conditions, including offering long-term mortgage loans, restricting property purchases by investors, and providing $200 billion in funding to subsidize lower interest rates. However, experts say the impact of these steps may be limited.
In 2025, the average 30-year mortgage rate hovered around 7% and fell to 6.15% by the end of the year—the lowest level since October 2024, according to Freddie Mac. The decline provided a modest boost in December, when home sales rose 5.1% from November to an annual rate of 4.35 million units, exceeding analysts’ expectations. The median home price in December edged up 0.4% to $405,400, the highest level ever recorded for the month.
Despite these limited improvements, housing affordability remains the biggest challenge for first-time buyers, especially amid broader economic uncertainty and a volatile labor market.
The time homes spent unsold on the market also lengthened, with inventory reaching 1.18 million units at the end of December, up 3.5% from a year earlier. At the current pace of sales, this supply covers only about three months of demand, whereas a balanced market typically requires five to six months of inventory.
