The U.S. housing market experienced a year full of negative indicators in 2025, as home sales fell to their lowest level in three decades, continuing their decline for the fourth consecutive year. Home prices hovering near record highs and elevated mortgage rates pushed many buyers to delay purchases or stay away from the market altogether.
The country recorded 4.06 million home sales during the year, slightly below 2024 levels, which were already the lowest since 1995, according to reports from the National Association of Realtors (NAR). Since 2023, annual sales have remained around the 4-million mark, well below the historical average of 5.2 million.
Lawrence Yun, chief economist at the National Association of Realtors, explained that 2025 posed growing challenges for homebuyers due to high prices and weak sales. However, he noted a gradual improvement in the final quarter of the year as mortgage rates declined and price growth began to slow.
December was among the few bright spots, as lower mortgage rates helped push existing-home sales above an annualized pace of 4.35 million units, marking a 5.1% increase from November and the strongest performance in nearly three years. Meanwhile, the national median home price rose 1.7% to $414,400.
This prolonged slowdown in the housing market began in 2022, when mortgage rates rose rapidly after a period of low rates during the COVID-19 pandemic. High borrowing costs, combined with sharp price increases and a chronic shortage of housing supply, discouraged many potential buyers.
In an attempt to ease the housing crisis, the Trump administration put forward several proposals, including introducing 50-year mortgages and banning large investors from purchasing homes, as well as allocating $200 billion to buy mortgage-backed securities to help lower interest rates. Even so, some economists believe these measures may have only a limited impact.
By the end of the year, mortgage interest rates had fallen noticeably to 6.15% in December, their lowest level since October 2024. Nevertheless, the market remains mired in a downturn, with weak sales activity for the third consecutive year, marking the worst performance in four decades.
December data also showed a slight year-on-year increase of 0.4% in the median home price to $405,400, the highest level ever recorded for December. Still, housing affordability remains a major challenge, particularly for first-time buyers who lack sufficient capital from selling previous properties.
The National Association of Realtors reported that 1.18 million homes remained unsold at the end of the month, up 3.5% from a year earlier but still far below pre-COVID-19 levels. With existing-home sales in the United States expected to rise by as much as 14% next year, hopes of reviving the housing market persist, supported by lower interest rates and policies aimed at encouraging buyers.
