Washington D.C. – July 28, 2025 –
The U.S. housing market experienced a notable slowdown in June, with existing home sales falling by 2.7% to a seasonally adjusted annual rate of 3.93 million units. This marks the lowest sales pace in nine months, highlighting the persistent challenges posed by elevated mortgage rates and a lingering undersupply of available homes.
The data, released by the National Association of REALTORS® (NAR), paints a picture of a market struggling with affordability. The median existing-home price for all housing types continued its upward trend, reaching $441,500 in June, a 2% increase from June 2024. This represents the 24th consecutive year-over-year price increase, further exacerbating affordability concerns for prospective buyers.
Key Factors Driving the Decline:
* High Mortgage Rates: Mortgage rates have remained stubbornly elevated, fluctuating near the 7% mark throughout the second quarter of 2025. The average 30-year fixed mortgage rate was around 6.77% by the end of June. These higher borrowing costs significantly impact purchasing power, pushing monthly mortgage payments beyond the reach of many potential homeowners. TD Economics noted that “affordability concerns remain pervasive, particularly given other rising homeownership costs, such as home insurance and repair.”
* Undersupply of Homes:
While total housing inventory did see a modest increase of 15.9% year-over-year in June to 1.53 million units, it remains stubbornly below pre-pandemic levels. This continued scarcity of homes for sale, particularly at entry-level price points, contributes to sustained price growth and limits options for buyers. NAR reported a 4.7-month supply of unsold inventory in June, up slightly from 4.6 months in May and 4 months in June 2024, but still indicating a competitive market for available properties.
* Buyer Hesitation:
The combination of high prices and elevated rates is leading to buyer fatigue and hesitation. Many potential purchasers are sidelined, waiting for more favorable market conditions. The share of individual investors or second-home buyers in transactions also decreased in June, reaching its lowest level since September 2022, suggesting a retreat from the market by these groups due to current conditions.
Regional Performance Varied:
Sales declined across most regions in June:
* Northeast: Down 8% month-over-month to an annual rate of 460,000.
* Midwest: Fell 4% month-over-month to an annual rate of 950,000.
* South: Decreased 2.2% month-over-month to an annual rate of 1.81 million.
* West: Saw a slight increase of 1.4% month-over-month, reaching an annual rate of 710,000, though sales were still down 4.1% year-over-year in this region.
Looking ahead, analysts from Realtor.com predict that home sales may fall to a new three-decade low in 2025, as elevated mortgage rates continue to crimp affordability. Despite the ongoing slump in sales, experts generally do not foresee an imminent national correction in home prices, but rather project modest growth, with relief only expected if mortgage rates decline more significantly or new construction dramatically increases. The market remains in a delicate balance, with affordability challenges dictating activity for the foreseeable future.
