As of July 6, 2025, the U.S. housing market is beginning to show positive signs of recovery. After grappling with a combination of high mortgage rates, limited housing inventory, and the lasting effects of the COVID-19 pandemic, the market is now seeing a shift toward a more balanced and accessible environment for both buyers and sellers.
Increased Housing Inventory: A Shift Towards Balance
One of the most promising developments in mid-2025 is the increase in housing inventory. For the first time in several years, more homes are entering the market, helping ease some of the constraints buyers have faced in recent years. According to data from Realtor.com, 22 of the 50 largest metropolitan areas in the U.S. have reported higher levels of active listings than before the pandemic. Cities like Austin, Texas, have seen inventory rise by 69%, followed by significant increases in San Antonio and Dallas-Fort Worth.
This surge in listings is attributed to both the completion of homes under construction and more sellers deciding to enter the market as economic conditions stabilize. More homes coming online is a significant improvement for buyers who have struggled to find suitable options in the past few years. While inventory levels are still not ideal, the trend is promising and could help prevent bidding wars that have been common over the last couple of years.
Declining Mortgage Rates Offer Some Relief to Buyers
Another factor contributing to the potential recovery of the housing market is the decline in mortgage rates. The average 30-year mortgage rate has dropped to 6.67% as of July 2025, the lowest level since early April of the same year. While mortgage rates are still higher than historical averages, this slight decrease is offering a window of opportunity for many buyers who have been hesitant due to high borrowing costs in the past.
The decline in rates comes after a few weeks of stabilization in financial markets, and experts suggest that the next few months could see further reductions. While mortgage rates remain elevated compared to pre-pandemic levels, the reduction offers some reprieve for buyers and signals a potential shift in the market toward more affordability.
Challenges: Affordability and Housing Shortages Persist
Despite these positive developments, challenges remain for buyers, especially first-time homebuyers. High home prices and rising construction costs are still significant obstacles. The U.S. faces a housing shortage of nearly 4 million homes, making it difficult for the market to reach a perfect equilibrium between supply and demand.
Moreover, affordability continues to be a major issue. The median home price across the U.S. has increased by 7% year-over-year, making it harder for many first-time buyers to enter the market. According to the National Association of Realtors (NAR), the number of first-time homebuyers has dropped dramatically, from 50% of total buyers in 2010 to just 24% in 2025.
Despite these challenges, the increase in inventory and slight decline in mortgage rates point to the potential for a more balanced market in the second half of 2025. Economists expect that the recovery will be gradual, but these positive signs could be the beginning of a more stable market for both buyers and sellers.
Outlook: A More Balanced Market on the Horizon
Looking ahead, experts believe the U.S. housing market will continue to stabilize in the second half of 2025. The increase in housing inventory, combined with the gradual decline in mortgage rates, provides a foundation for a more balanced and less competitive market. While affordability remains a significant challenge, buyers may find more options at slightly more manageable prices in the near future.
For sellers, this could mean a more predictable market without the frenzied bidding wars that have become commonplace in recent years. As more inventory enters the market and buyers regain confidence, there is potential for the housing market to return to a healthier state by the end of 2025.
