The U.S. housing market is showing a split personality as regional conditions begin to diverge. While national supply remains below pre-pandemic averages, some states are now experiencing a return to more balanced inventory levels. For buyers and sellers, this means conditions vary dramatically depending on where they live and what type of property they are pursuing.
National housing inventory is continuing to climb, though the pace and impact vary across the country. Realtor.com reported that in July 2025, active listings were up nearly a quarter compared to the previous year, marking nearly two years of steady growth. This brought total listings to more than one million homes nationwide, but even this figure remains about 13 percent below the levels seen in the years before the pandemic. Homes for Heroes’ September 2025 snapshot echoed this picture, noting that inventory nationally is still tighter than historical averages, yet in 12 states, conditions have normalized or even surpassed long-term supply levels.
The regional breakdown tells a more complex story. In the South and West, buyers are starting to encounter a more favorable landscape. Homes that once sold within days are lingering on the market for weeks. This shift is creating more opportunity for negotiation and putting an end to the bidding wars that defined the pandemic-era frenzy. Sellers in these regions are also beginning to cut prices, with some major metropolitan areas such as Austin, Miami, and Los Angeles showing annual declines in the range of three to four percent. Though not a dramatic correction, this change signals a clear cooling in once overheated markets.
By contrast, the Northeast and Midwest remain more constrained. Buyers there are still competing aggressively for desirable listings, and homes tend to sell more quickly than in the South or West. While price growth has slowed, many of these markets continue to show modest gains instead of declines. This uneven landscape reflects broader demographic and economic forces. Population growth and migration patterns have funneled many buyers toward Southern and Western states in recent years, creating strong demand and intense competition. As affordability concerns mounted, some buyers stepped back, allowing inventory to recover. The Northeast and Midwest, however, have not experienced the same levels of outward migration, helping keep supply conditions tighter.
Mortgage rates are another key part of the picture. After climbing to levels not seen in two decades, rates have recently eased. The average 30-year fixed loan is now hovering in the mid-six percent range, down from highs above seven percent in late 2023 and early 2024. This modest drop is encouraging for buyers who were sidelined by affordability challenges. Lower borrowing costs can make monthly payments more manageable, even if home prices remain high. However, affordability is still stretched by historical standards, given that median home prices remain elevated compared to household income growth.
For homeowners looking to sell, the implications vary by region. In parts of the South and West, where supply is rising and days on market are lengthening, sellers must be more strategic. Staging, presentation, and accurate pricing have become increasingly important. Homes that are overpriced are more likely to sit unsold, forcing eventual price cuts. On the other hand, in areas where supply is still constrained, such as portions of the Midwest and Northeast, sellers continue to benefit from multiple offers and faster sales, though even here, expectations must be adjusted as market dynamics evolve.
First-time buyers may find more opportunities in the shifting landscape. In metros where inventory is rising and prices are softening, the path to homeownership is becoming more attainable than it was during the peak of the pandemic housing surge. This does not mean the process is easy. High prices, property taxes, insurance costs, and other financial barriers remain significant. Yet for buyers with financing in place and flexibility in location, the current environment may offer more leverage than at any time in the past five years.
The broader question is how sustainable these trends will be. Much depends on Federal Reserve policy and the trajectory of interest rates over the coming year. If rates decline further, pent-up demand could re-enter the market, absorbing excess inventory and stabilizing prices. If rates hold steady or rise again, the slowdown in the South and West may deepen. In regions where inventory remains scarce, even modest improvements in affordability could reignite competition, leaving buyers in the same position they faced earlier in the decade.
The national housing market remains far from uniform. For some regions, the slowdown offers relief to buyers and a signal that the frenzied conditions of the past few years are finally cooling. For others, especially in the Northeast and Midwest, supply remains tight enough to keep competition alive. What is clear is that the once monolithic story of a hot U.S. housing market has fractured into distinct regional narratives, shaped by supply, demand, and the gradual easing of borrowing costs.
