U.S. Home Sales Could Hit Lowest Point in 30 Years as High Mortgage Rates Persist, Forecast Warns
The housing market may be heading into its quietest year in decades, as climbing mortgage rates continue to squeeze affordability and discourage buyers from entering the market. According to a midyear update from Realtor.com’s economic research team, existing-home sales in 2025 could drop to levels not seen since the mid-1990s.
The updated Realtor.com Housing Forecast, released Wednesday, revises earlier projections issued in December. Among the most notable changes is a bleaker outlook for both home sales and mortgage rates.
Originally, 2025 was expected to bring a modest rebound in existing-home sales compared to the previous year. That hope has been dashed. The updated forecast now anticipates a 1.5% decline in annual sales volume, bringing the total number of transactions down to just 4 million.
If that projection holds, 2025 will mark the third consecutive year of exceptionally low sales volume, comparable to or even below the levels recorded in 1995, when only 3.8 million existing homes changed hands.
For context, both 2023 and 2024 had already registered the slowest sales years in nearly three decades, according to data from the National Association of Realtors (NAR).
“Even with more homes on the market, buyer response has remained muted compared to what we’d expect from similar supply shifts in the past,” says Danielle Hale, chief economist at Realtor.com.
“In regions like the South and West, inventory gains have been more substantial, but affordability constraints continue to weigh on demand. Meanwhile, the Northeast and Midwest remain tighter markets with relatively steadier buyer activity.”
One of the main culprits behind the stagnating market is persistently high mortgage rates. The 30-year fixed mortgage rate is now expected to average 6.7% for the year, up from the 6.3% average projected just months ago. By year-end, rates are expected to hover around 6.4%, rather than the previously predicted 6.2%.
As of mid-July, rates were averaging 6.75%, according to Freddie Mac, marking a sustained stretch above 6.6% since the start of 2025.
“High mortgage rates are causing home sales to remain stuck at cyclical lows,” said Lawrence Yun, chief economist for the NAR, in a release.
“If the average mortgage rates were to decline to 6%, our scenario analysis suggests an additional 160,000 renters becoming first-time homeowners and elevated sales activity from existing homeowners.”
A Realtor.com chart included in the report illustrates how much more stubborn mortgage rates have been than initially forecasted, dimming hopes for a significant market recovery.
Even as sales falter, a dramatic decline in home prices doesn’t appear to be on the horizon. Instead, Realtor.com economists foresee modest price growth of 2.5% for the year, a downgrade from the 3.7% increase predicted in December, but still growth nonetheless.
Rather than slash their asking prices, many sellers are simply stepping away from the market entirely. Realtor.com recently noted a 47% surge in delistings in May compared to the same month a year earlier, suggesting that homeowners are more inclined to wait than to negotiate in this high-rate climate.
“Sellers still have pretty high expectations of what they can get for their homes,” Joel Berner, a senior economist for Realtor.com, told The New York Times.
“A lot of them are choosing to delist rather than take drastic price cuts.”
In effect, the market is caught in a holding pattern, being too expensive for many buyers to enter, yet too stagnant for prices to decline meaningfully.
One significant change this year is the increase in active listings, particularly in the South and West. In May, the nationwide number of homes for sale exceeded 1 million for the first time since late 2019, signaling an end to the ultra-tight inventory crunch that defined much of the pandemic era.
However, the hoped-for surge in sales that might accompany this inventory boost has not materialized. High borrowing costs and record home prices continue to deter buyers, many of whom are choosing to wait out the market or forgo homeownership altogether.
Meanwhile, residential construction projections have taken a sharp hit. Single-family housing starts are now expected to fall 3.7% in 2025, totaling just 980,000 units. That’s a far cry from the 13.8% annual gain that economists had forecast at the start of the year, a troubling development for a market still millions of homes short of meeting expected demand.
The continued mismatch between supply, demand, and affordability is having profound ripple effects on American households. The median age for first-time homebuyers has now climbed to a record 38 years old, as more young adults delay or abandon plans to purchase homes. Many are choosing to rent for longer or continue living with family to cope with rising costs.
This shift is reflected in the national homeownership rate, which is expected to dip to 65.2% this year, down from 65.6% in 2024 and 65.9% the year prior.
One modest silver lining lies in the rental market. While homeownership remains elusive for many, rent growth is expected to remain soft in 2025. Median asking rents are projected to edge down 0.1%, following a 0.2% decline last year, providing some relief for renters even as homebuyers continue to struggle.
All told, the 2025 housing landscape appears to be one of frustrating stasis with prices creeping upward, mortgage rates stubbornly high, and both buyers and sellers reluctant to act. Even with some improvements in inventory, the weight of economic pressures, particularly borrowing costs, continues to drag the market into a prolonged lull.
Unless there’s a significant shift in interest rates or wage growth, the U.S. housing market may remain stuck in this state well into next year.
Moumita Basuroychowdhury is a Contributing Reporter at The National Digest. After earning an economics degree at Cornell University, she moved to NYC to pursue her MFA in creative writing. She enjoys reporting on science, business and culture news. You can reach her at moumita.b@thenationaldigest.com.
