Redfin Predicts Flat or Falling Home Prices Amid Rising Mortgage Rates
Brokerage and listings platform Redfin forecasts that U.S. home prices will remain flat or decline by about 1% by the end of 2025. This shift is largely driven by persistently high mortgage rates, expected to hover around 7% for much of the year, contrasting sharply with recent years of steady appreciation fueled by limited inventory.
Current Market Trends: Declining Prices and Rising Inventory
Home prices have fallen 1.1% year-over-year as of April 2025, hitting a six-month low. Additionally, the average time to sell a house has increased by five days compared to last year, now totaling approximately 45 days. Meanwhile, inventory levels have surged 16.7%, reaching the highest point in five years, with new listings up 8.6%.
Economic Uncertainty and Changing Buyer-Seller Dynamics
The real estate landscape has shifted from the competitive, seller-favored market of recent years to one where buyers hold more negotiating power. Sellers—many who purchased homes near the peak prices in 2021-2022—face the reality of dropping prices after extended listing periods without offers, often resorting to price reductions and concessions to close sales.
Corey Stambaugh, a Redfin Premier agent, notes that sellers are adjusting expectations amid this new reality, preferring to accept lower offers than risk further market uncertainty.
Regional Variations in Market Activity
While the Sunbelt region has experienced the most significant home price declines due to a surge in new construction, the Northeast and Midwest continue to see moderate price increases. Overall, sales pace slowed to the slowest April in 16 years, according to the Wall Street Journal.
How Buyers and Investors Can Navigate the Market
For buyers and investors, this market presents opportunities to negotiate favorable deals. Chen Zhao, Redfin’s head of economics research, advises acting sooner to capitalize on equity-building potential. Financing strategy is critical; with mortgage rates near 7%, cash purchases offer greater negotiating leverage and reduce financial risk compared to high-leverage approaches.
Baby Boomers Lead Home Buying
Baby boomers currently dominate U.S. home purchases, accounting for 42% of sales from mid-2023 to mid-2024. This demographic benefits from available capital and avoids mortgage challenges faced by first-time buyers contending with limited inventory and affordability hurdles.
Tariffs and Interest Rates: Persistent Challenges
Ongoing tariffs, particularly on China, continue to inflate goods prices and hinder Federal Reserve efforts to reduce interest rates. Industry voices, including financial advisor Dave Ramsey, emphasize the need for tariff resolution before mortgage rates decline and the housing market eases.
Final Thoughts
While challenges remain, including high interest rates and slower sales, the market differs markedly from 2022’s seller-driven environment. Cash buyers in key Sunbelt markets may find substantial bargains, while buyers in the Northeast and Midwest may still encounter competition.
Success in this evolving landscape favors well-capitalized buyers employing prudent financing strategies over heavily leveraged investors.