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The U.S. housing market remained in a prolonged slump for the fourth consecutive year in 2025, with sales stagnating at a 30-year low as elevated home prices and high mortgage rates continued to sideline potential buyers.
Data released Wednesday by the National Association of Realtors (NAR) showed sales of previously owned homes totaled just 4.06 million for the year, essentially unchanged from 2024’s figures, which had already marked the lowest level since 1995. When not rounded, 2025 sales actually registered slightly below the previous year’s total.
The prolonged downturn extends a troubling trend that began in 2022, with annual sales declining for four straight years. Meanwhile, the national median home price climbed 1.7% in 2025 to $414,400, further straining affordability.
“2025 was another tough year for homebuyers, marked by record-high home prices and historically low home sales,” said Lawrence Yun, NAR’s chief economist. “However, in the fourth quarter, conditions began improving, with lower mortgage rates and slower home price growth.”
The current annual sales pace of around 4 million homes has persisted since 2023, well below the historical norm of 5.2 million. This sustained slump originated when mortgage rates began climbing from pandemic-era lows in 2022. The market has since been caught in a difficult cycle of rising mortgage rates, escalating home prices, and a chronic housing shortage resulting from more than a decade of insufficient construction.
The Trump administration has recently proposed several measures aimed at addressing the affordability crisis. These include introducing 50-year mortgages, restricting large investors from purchasing houses, and allocating $200 billion to buy mortgage bonds in an effort to lower rates. However, many economists remain skeptical about the potential impact of these proposals.
There are signs of modest improvement. Mortgage rates, which hovered around 7% for much of the year, began easing in late summer. According to Freddie Mac, the average 30-year mortgage rate closed 2025 at 6.15%, its lowest level since October 2024.
This decline in rates helped boost December’s existing home sales to a seasonally adjusted annual rate of 4.35 million units, a 5.1% increase from November and the fastest sales pace in nearly three years. The December figure surpassed economists’ expectations of 4.14 million, according to FactSet.
Home prices also inched higher in December, with the median sales price rising to $405,400, a 0.4% increase from December 2024. This marked an all-time high for December and the 30th consecutive month of year-over-year price increases.
Affordability remains a significant obstacle, particularly for first-time buyers who lack equity from an existing home. Economic uncertainty and concerns about job security have further dampened buyer enthusiasm.
The sales slowdown has resulted in properties remaining on the market longer. NAR reported 1.18 million unsold homes at the end of December, a 3.5% increase from a year earlier. While this represents some improvement in inventory, it remains far below the pre-pandemic norm of roughly 2 million available homes.
December’s inventory translates to a 3.3-month supply at the current sales pace, still well short of the 5- to 6-month supply typically considered indicative of a balanced market between buyers and sellers.
Looking ahead, Yun forecasts existing home sales to jump 14% in 2026, a notably more optimistic projection than other housing economists, whose predictions range from 1.7% to 9% growth. Most experts expect mortgage rates to continue declining, though forecasts generally show the average 30-year mortgage rate remaining above 6% — approximately twice what it was six years ago.
A significant impediment to market recovery is the reluctance of current homeowners to sell. Nearly 69% of U.S. homes with outstanding mortgages have fixed rates of 5% or lower, and more than half enjoy rates at or below 4%, according to Realtor.com. For these homeowners, selling would mean giving up favorable financing terms.
Despite these challenges, with mortgage rates at their lowest level in 15 months and home price growth moderating, conditions may be improving as the spring homebuying season approaches.
“There’s quite sizeable pent-up demand, and the only way to get that pent-up demand back to the market is we need more inventory and we need better affordability,” Yun concluded.
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9 Comments
It’s clear the housing market has faced significant headwinds in recent years, but the indications of improving conditions in Q4 2025 are an encouraging sign. Restoring a better balance between home prices, mortgage rates, and buyer demand will be crucial to getting the market back on a healthier trajectory.
The 30-year low in home sales is a sobering statistic, but it’s good to see that the market started to show some signs of recovery by the end of 2025. Hopefully the industry can build on that momentum and find a more sustainable balance between supply, demand, and affordability in the years ahead.
The 30-year low in home sales is certainly concerning, but I’m glad to see the report mention that mortgage rates and price growth slowed in the fourth quarter. Perhaps this indicates the market is starting to stabilize, even if it’s been a difficult few years for homebuyers.
Yes, the slowdown in price growth and lower mortgage rates are positive signs. Hopefully this helps improve affordability and bring more buyers back into the market.
It’s been a tough stretch for the housing market, but the fact that conditions started improving towards the end of 2025 is encouraging. Sustained lower mortgage rates and more moderate price growth could be just what’s needed to get sales moving in the right direction again.
The housing market has certainly faced some challenges in recent years, with high prices and mortgage rates pricing out many buyers. However, it’s encouraging to hear that conditions started improving in the fourth quarter of 2025. Hopefully, this trend will continue and the market can find a more sustainable balance.
The housing market has certainly been through a rough patch, but the fourth quarter data offers some hope that a turnaround may be on the horizon. Lower mortgage rates and more moderate price growth could entice more buyers back into the market and help revive sales volumes.
The prolonged downturn in home sales is quite concerning, but it’s good to see the report highlight the positive trends emerging in the fourth quarter of 2025. Hopefully this marks the start of a more sustainable recovery for the housing market.
While the prolonged slump in home sales is concerning, I’m optimistic that the industry can bounce back if the trends of lower mortgage rates and slower price growth continue. Homebuyers have certainly faced a challenging environment, so any signs of improving affordability are welcome news.