Real Estate in 2025 - Who’s On Top?

The real estate market has been in a total whirlwind ever since the COVID-19 pandemic. While there originally was a mass exodus to the suburbs, now 5 years out a lot has changed against the backdrop of high interest rates and a complex economy.

2025 thus far has shaken up the United States thanks to the economic impacts of tarrifs, AI in the job market, a RTO and high interest rates. While many employees were impacted in the beginning of the year due to workforce reductions, it seems there’s been a rebound on top of “better than expected” inflation reports easing consumer prices.

Now where does this leave us if you’re looking to buy or sell a home?

As of mid-2025, the U.S. real estate market is in a transitional phase, marked by cooling demand and modest price appreciation. After years of rapid growth, home price increases have slowed significantly, with most major forecasts predicting gains of just 2–3% this year.

Inventory levels are also gradually improving due to increased construction and a slight uptick in listings, but still remain below pre-pandemic averages. Buyer activity is subdued, with home sales hitting multi-year lows, and many properties now selling below asking price.

While this has shifted some leverage back to buyers, affordability challenges continue to shape the market’s overall pace. Many are also opting to renovate their homes to add value while they wait for prices to drop. Check out Wealth Elf’s Guide:

Interest rates remain a central force in shaping housing dynamics. Mortgage rates have hovered between 6.5% and 7% for much of the year, making borrowing significantly more expensive than in the low-rate years of the early 2020s. This has created a “lock-in effect,” where homeowners with ultra-low mortgages are reluctant to sell and take on higher rates, reducing resale inventory. At the same time, higher rates have slashed buyer purchasing power.

Looking ahead, the trajectory of mortgage rates will likely determine how the rest of the year plays out. If rates remain high, home price growth could stagnate further and affordability could worsen, dampening economic activity.

However, even a modest drop in rates could re-energize buyer demand and improve market fluidity. For now, the housing market is caught in a delicate balancing act where softening prices and increased concessions are creating opportunities for buyers, but only those who can manage the high cost of borrowing are able to take advantage.

Do you rent or own? Are you looking to buy or sell? Let us know at @Wealth_Elf on Instagram.