Mortgage Rates and Affordability

Mortgage rates remain elevated, hovering around the high-6% range for a 30-year fixed loan. The Freddie Mac weekly average was about 6.8% in late April, a slight improvement from over 7.1% a year ago redfin.com.

However, these rates are still high enough to keep monthly payments near record levels, straining affordability for many buyers. In fact, Redfin reports that 2025’s spring homebuying season has been lackluster, with record-high housing costs and economic uncertainty keeping many would-be buyers on the sidelines redfin.com.

Mortgage applications and buyer inquiries remain subdued, reflecting the reality that higher financing costs are pricing some consumers out or causing them to delay purchases. Until borrowing costs ease significantly, affordability will continue to be a top concern limiting buyer activity.

Inventory Levels and New Listings

Housing supply is gradually improving compared to last year. New listings – owners putting homes up for sale – have increased by roughly 11% year-over-year this spring realtor.com.

This rebound in listings is helping boost the number of homes on the market: active inventory is up about 30% from a year ago as of late April realtor.com.

In fact, the U.S. has now seen well over a year of consecutive annual inventory gains each week, a welcome change from the severe shortages of 2021–2022. Realtors note that while choices for buyers have expanded, overall supply remains well below pre-pandemic norms – especially in parts of the Midwest and Northeast, which still face some of the nation’s largest housing supply gaps realtor.com.

In other words, inventory is rising from last year’s lows but has not fully caught up with demand. There is currently about 4.1 months of supply on the market (a balanced market is ~4–5 months), so conditions are slowly inching toward equilibrium redfin.com.

Many homeowners are still reluctant to sell (often due to being locked into ultra-low mortgage rates from prior years), but those who do list are giving buyers more options than seen recently.

Home Prices and Pricing Trends

Despite higher interest rates, home prices nationally are holding steady or seeing modest growth. According to the National Association of Realtors (NAR), the median existing-home sale price in March was $403,700, up 2.7% from a year earlier – an all-time high for the month of March nar.realtor.

List prices in online listings have been essentially flat to slightly up compared to last spring (Realtor.com data shows the median asking price was about 0.5% higher year-over-year at the end of April realtor.com).

These small gains indicate that, broadly, the market is not seeing price declines – strong buyer demand for the limited supply continues to prop up prices. That said, price growth has clearly cooled from the double-digit increases of the pandemic boom.

Many sellers are testing the market with ambitious asking prices but then discovering buyer pushback. In fact, the typical U.S. home seller’s list price is about 9% (roughly $39,000) higher than the price at which homes are actually selling – the largest list-to-sale price gap since 2020 redfin.com.

This dynamic reflects a shift in favor of buyers: whereas bidding wars were common a year or two ago, now price reductions are more frequent (reaching multi-year highs) as sellers adjust to more balanced conditions realtor.com. Overall, home values are not crashing; rather, the market is in a period of gradual adjustment with slight upward price pressure nationally, tempered by affordability limits.

Regional Market Differences

Market trends are varying by region and metro. Generally, many Midwest and Northeast markets are showing stronger price growth, while some previously red-hot Western and Sun Belt markets have cooled.

NAR’s data by region illustrates this clearly: the Northeast’s median price was up 7.7% year-over-year in March, the highest gain in the country, whereas the South’s median price was nearly flat (+0.6% YoY) nar.realtor.

The Midwest saw moderate appreciation (+3–4%), and the West was up about 2.6% YoY overall nar.realtor. On a metro level, affordable Midwestern and East Coast cities are leading in price increases – for example, Newark, NJ home prices rose about 11% from last year, Milwaukee +10%, and Chicago +7% redfin.com.

By contrast, some of the metros that experienced the biggest spikes during the pandemic are now seeing slight declines. Oakland, CA’s median sale price is down roughly 5% year-over-year, and other high-flying Sun Belt markets like Phoenix, Austin, and Jacksonville are 2–3% below last year’s price levels redfin.com.

In total, prices have declined from a year ago in about 9 of the country’s 50 largest metro areas, largely in parts of California, Texas, and the Southeast redfin.com. These regional trends suggest that overheated markets are undergoing needed corrections, while markets that remained more affordable are still seeing solid demand and price gains.

Real estate is always local – agents in cooling markets are observing longer selling times and more price cuts, whereas those in resilient markets still see quick sales and competitive offers on attractive listings.

Buyer and Seller Sentiment

Both buyers and sellers are approaching this spring market with caution. Buyer sentiment has been hit by broader economic worries – consumer confidence fell sharply in April, reaching its lowest level since 2011, with the steepest drops in confidence among 35- to 55-year-olds and higher-income households realtor.com (key homebuying demographics).

This wariness, along with high mortgage costs, means many buyers are being more deliberate and price-sensitive. We see this in the data: homes are sitting on the market a bit longer on average (about 3 days more than this time last year) realtor.com, and only roughly 27% of homes are now selling above their list price, down from 31% a year ago redfin.com.

Fewer bidding wars and a smaller share of over-asking offers indicate that buyers have regained some negotiating power. Those who are in the market are often contingency-fatigued – they are less likely to waive inspections or appraisals and are willing to walk away if a home is overpriced or needs too much work.

On the other side, sellers’ expectations are gradually adjusting. Many sellers initially aim for high asking prices to ‘test the waters,’ but if a home doesn’t garner quick interest, price cuts are becoming common. In fact, price reductions have climbed to multi-year highs this season as sellers respond to buyer feedback on affordability realtor.com.

Some homeowners are simply choosing not to sell at all unless they absolutely have to, given that moving could mean trading a 3% old mortgage for a ~6.8% new one. The net effect is a cautious standoff in some markets: buyers are patient and selective, and sellers who want to close a deal often need to be realistic on pricing and offers.

Well-priced, move-in-ready homes still sell fairly quickly, but overpriced listings may stagnate, a notable change from the instant sales seen during the 2021 frenzy.

Economic and Policy Developments Impacting Housing

Big-picture economic factors and policy decisions are casting a shadow on the housing market’s trajectory. A key development this week was a strong April jobs report, which showed higher-than-expected employment gains and a steady 4.2% unemployment rate redfin.com.

A robust labor market, coupled with persistent inflation pressures (exacerbated by recent trade tariff uncertainties), has made it less likely that the Federal Reserve will cut interest rates in the immediate future redfin.com.

Earlier this year, many in the market hoped for relief in borrowing costs, but the Fed is now expected to keep its policy rate elevated, which means mortgage rates will likely continue to hover in the high-6% range for the foreseeable future redfin.com.

Real estate professionals should be prepared for this relatively high-rate environment to persist unless economic conditions soften significantly.

On the policy front, housing affordability and supply challenges are drawing attention from lawmakers. For example, a bipartisan bill called the Neighborhood Homes Investment Act was reintroduced in Congress in April communityprogress.org.

This proposed legislation would create a new federal tax credit to incentivize building and rehabilitating affordable single-family homes in distressed communities – addressing issues like the appraisal gap and the shortage of starter homes. The act is designed to spur the development of hundreds of thousands of homes over the next decade, targeting areas with vacant properties and high needs.

While the bill is still under debate and not yet law, its renewed consideration highlights that boosting housing supply is a national priority. Likewise, various state governments (such as Texas) are exploring measures like zoning reforms and faster permitting to encourage more home construction texastribune.org, aiming to alleviate high prices in the long run.

Market Summary

All in all, the housing market in early May 2025 remains a mixed bag: higher mortgage rates and economic jitters have cooled the frenzy of the past few years, but demand still exceeds supply in many regions, keeping prices relatively firm.

Real estate agents should note the gradual shift toward a more balanced market – inventory is improving and buyers have a bit more leverage – yet conditions still favor sellers in many areas given the inventory shortfall versus pre-2020 norms.

Staying on top of local data is important, as trends differ city by city. Going into the remainder of the spring season, well-informed pricing, creative financing solutions, and managing client expectations on both sides will be key.

By keeping current on these national trends and emerging policies, agents can better advise their clients through the opportunities and challenges of this evolving market realtor.com redfin.com.