Chicago, IL — May 22, 2025 — The National Association of Realtors (NAR) has adjusted its housing market forecast for 2025, signaling a tempered outlook amid ongoing economic uncertainty and sustained high borrowing costs. The latest projections estimate 4.3 million existing-home sales for the year, representing a 6% increase over 2024 but falling short of earlier, more optimistic predictions.
This revision reflects the complex and uneven landscape of the U.S. housing market, which continues to grapple with the effects of rising mortgage rates, regional supply imbalances, and broader economic pressures.
Mortgage Rates and Economic Uncertainty Impact Buyer Confidence
A significant factor driving the forecast adjustment is the persistent volatility in mortgage interest rates. After reaching historic lows near 3% during the COVID-19 pandemic, mortgage rates have steadily climbed and currently hover near 7%, a level unseen since before the financial crisis of 2008. This rise is largely a consequence of the Federal Reserve’s ongoing efforts to contain inflation through a series of interest rate hikes starting in 2022.
The higher borrowing costs have translated to substantially increased monthly mortgage payments, dampening affordability and curbing buyer enthusiasm. According to recent data from Freddie Mac, the average 30-year fixed mortgage payment has increased by nearly 30% compared to early 2023 levels, placing homeownership out of reach for many prospective buyers.
Economic uncertainty further clouds the outlook. Ongoing tariff disputes, particularly between the U.S. and China, continue to affect consumer prices and manufacturing costs, influencing the broader economic environment. Simultaneously, government fiscal debates and concerns over the federal deficit have created an atmosphere of caution, with many buyers and sellers delaying decisions amid unclear economic signals.
Regional Housing Supply Disparities Drive Market Variation
The housing market remains far from uniform, with regional disparities influencing the overall forecast.
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Sun Belt States Maintain Robust Demand: States such as Texas, Florida, and Arizona continue to benefit from strong population inflows due to job growth, favorable climate, and relatively affordable housing markets. This migration trend supports steady demand, with cities like Austin, Dallas, and Phoenix reporting moderate sales increases and manageable price growth.
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Supply Shortages Persist in Established Metro Areas: In contrast, long-established metropolitan regions in the Northeast and parts of the Midwest still face constrained housing supply. Limited new construction, zoning restrictions, and high land costs have maintained tight inventories, which keep prices elevated and buyer competition intense despite slower sales volume. Cities like New York, Boston, and Chicago exemplify these challenges, where affordability remains a significant barrier for many buyers.
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Moderate Market Adjustments on the West Coast: California and other West Coast markets have experienced some cooling, especially in areas impacted by tech sector layoffs and remote work trends. While certain cities like San Francisco and Los Angeles report modest price declines and longer listing periods, demand remains strong in emerging markets such as Sacramento and Portland.
NAR’s Policy Recommendations to Address Affordability Crisis
Recognizing these challenges, NAR President-elect Kevin Brown highlighted the urgent need for policy reforms aimed at expanding affordable housing and improving market access, particularly for first-time buyers.
“We must prioritize affordable housing solutions to ensure a healthy and sustainable market,” Brown said. “This includes providing incentives for homebuilders to increase affordable housing inventory, expanding down payment assistance programs, and reforming zoning and permitting processes to accelerate development.”
Incentivizing Affordable Housing Development
Brown advocated for increased government and private sector collaboration to boost housing supply. In particular, he stressed the importance of incentivizing developers to build entry-level homes and affordable rental units, which remain in short supply nationwide.
Several states and municipalities have already begun implementing measures aligned with this vision. For example, California recently passed legislation easing zoning restrictions to allow for more multi-family developments, while Texas has introduced tax credits for affordable housing projects. These efforts, while promising, need to be scaled nationally to make a meaningful impact.
Expanded Down Payment Assistance
Down payment requirements continue to be a significant hurdle for many would-be homeowners, especially younger buyers and those from historically underserved communities. NAR supports broadening federal and state programs that offer down payment assistance, which can reduce upfront costs and open the market to a wider demographic.
Streamlining Zoning and Permitting
Lengthy and complicated zoning and permitting processes remain a bottleneck for new housing development. Brown emphasized the need for reform to expedite approvals, reduce red tape, and allow communities to respond more quickly to housing demand.
Realtors’ Market Observations: Cautious Buyers and Patient Sellers
Across the country, realtors report a marketplace characterized by cautious but engaged buyers and sellers adapting to shifting conditions.
Buyers are taking longer to make decisions, often conducting thorough due diligence and negotiating more aggressively on price and contingencies. This extended timeline reflects both affordability concerns and a desire to avoid overpaying in a market with high financing costs.
Sellers, meanwhile, are encountering longer listing periods compared to the frenzied markets of recent years. However, in areas with constrained supply, sellers can still command strong prices. Realtors note that while bidding wars are less common, competition remains fierce for well-priced, move-in-ready homes.
Market Outlook: A Gradual Path Toward Balance
NAR’s adjusted forecast reflects a broader trend toward a more balanced housing market. After years of rapid price appreciation and intense competition, the market is moderating, allowing for more negotiation and fewer bidding wars.
While a dramatic price correction is unlikely due to ongoing supply shortages and demographic demand, price growth is expected to slow and even decline modestly in some overheated markets.
Construction activity, which has lagged for much of the past decade, is anticipated to rise modestly as builders respond to persistent demand and shifting policy incentives. However, challenges such as rising material costs, labor shortages, and regulatory hurdles will temper the pace of new housing starts.
Implications for Buyers and Sellers
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Buyers: Prospective homeowners should seek mortgage pre-approval early and explore a range of financing options, including adjustable-rate mortgages (ARMs) and down payment assistance programs. Being flexible on location and home type may also improve opportunities.
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Sellers: Pricing homes realistically and investing in curb appeal and staging can attract serious buyers. While patience may be necessary, especially in competitive markets, constrained inventory in many areas supports strong seller pricing power.
Summary of Key Takeaways
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NAR lowers 2025 existing-home sales forecast to 4.3 million, a 6% increase over 2024 but below previous estimates.
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Elevated mortgage rates near 7% and economic uncertainty continue to challenge buyer affordability and confidence.
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Regional market disparities persist, with strong demand in Sun Belt states and tight supply in Northeast and Midwest metros.
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NAR calls for policy reforms including incentives for affordable housing, expanded down payment assistance, and zoning reform.
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Realtors observe cautious buyers taking longer to decide and sellers facing longer listing times but benefiting from supply constraints.
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Market expected to balance gradually with slower price growth and modest increase in construction activity.
