Real estate market showed an upward trend in the second quarter of 2025, with property costs increasing substantially
Record Home Prices Persist Despite Slowing Sales and Higher Mortgage Rates
The national median single-family existing-home price continued to rise in Q2 2025, reaching a record high of $429,400, despite slowing sales and rising mortgage rates. This trend is primarily due to persistent inventory shortages in certain regional markets, regional variation in demand and supply, and affordability dynamics influenced by rising competition from new construction and existing home inventories.
Inventory Constraints Persist in Some Regions
Although national existing home sales slowed 2.7% month-over-month in June 2025 and mortgage rates remained elevated, inventories rose 15.9% year-over-year to about 1.53 million units, creating roughly 4.7 months of supply[1]. However, inventory remains tight in regions like the Northeast and parts of the Midwest. These areas have less supply relative to demand, sustaining upward pressure on prices despite the broader national softening[2][5].
Mixed Market Conditions and Regional Variation
Although 22 of the 50 largest metro areas saw price declines—especially in the South and some Sun Belt markets where supply and new construction are higher—other markets saw modest price appreciation due to tighter inventories and more robust demand, thereby keeping the national median price elevated[2][5].
New Construction Competition and Pricing Pressures
In markets with high homebuilder activity, particularly in the South where new homes are more plentiful, new construction prices have flattened or slightly declined, as builders lower prices to compensate for reduced buyer demand amid high mortgage rates. This competition can put downward pressure on prices regionally but does not fully offset price gains in tighter markets[5].
Affordability and Buyer Demand Complexities
Rising mortgage rates (around 6.7% in mid-2025) have slowed overall sales but increased supply somewhat, stabilizing prices nationally. However, limited affordability and labor market weakness (as indicated by a weak July jobs report) have complicated the outlook[1][4]. Despite this, many buyers in inventory-constrained areas continue to bid prices upward to secure homes, maintaining the national median price at record highs (e.g., $435,300 median price in June 2025)[1][2].
Economic Factors and Market Sentiment
The broader economy showed a mixed signal with strong GDP growth but weak job reports, contributing to complex consumer confidence and housing demand patterns that allow prices to hold firm even as sales decline[1].
Regional Price Trends
The Midwest had a median single-family existing-home price of $328,800, with a year-over-year increase of 3.5%. The Northeast had a median single-family existing-home price of $527,200, with a year-over-year increase of 6.1%. The West had a median single-family existing-home price of $646,100, with a year-over-year increase of 0.6%. The South had a median single-family existing-home price of $376,300, with no year-over-year change[1].
California and Hawaii continue to have the priciest markets. The priciest market remained San Jose-Sunnyvale-Santa Clara in California, with a median single-family existing-home price of $2.14 million, up 6.5% from last year[1].
NAR Chief Economist Lawrence Yun attributed strong buyer demand in the Midwest to relative affordability and supply constraints in the Northeast.
Despite the cooling market momentum, home prices continue to rise, with only 75% of metro areas seeing year-over-year price gains in Q2 2025, down from 83% in Q1[1]. The year-over-year price increase was 1.7%, slower than the 3.4% rise in Q1 2025[1]. The trend of high-income consumers buying more expensive homes and moderate-income consumers remaining on the sidelines continues to be observed.
- Inventory constraints and regional variation in the housing market have contributed to a rise in personal finance costs for homebuyers, as record-high median home prices persist despite slower sales and higher mortgage rates.
- Despite the slowing housing-market growth in certain regions, investing opportunities in real-estate continue to exist, particularly in areas with tighter inventory and more robust demand, where the trend of high-income consumers buying more expensive homes shows no signs of abating.
