JULY 2025 HOUSING MARKET REPORT: Affordability Crunch Reshapes the Market

After a strong start to the year, the housing market is showing signs of fatigue. Rising inventory, persistent affordability issues, and stalled buyer demand have tilted the balance of power back toward home shoppers in many regions. As we head into the second half of 2025, here’s what industry analysts and housing platforms are saying about the state of the market:

STEVEN THOMAS: Market at a Crossroads

According to Steven Thomas, the housing market is now clearly slowing—and mortgage rates are still the main factor holding things back. As of mid-year, the future of the market hinges on what happens with interest rates in the second half of 2025.

If mortgage rates remain stuck above 6.5%, Thomas predicts more of the same: limited movement, constrained affordability, and sluggish buyer activity. If rates fall below that mark and stay there, the market could pick up steam. But for now, most trends suggest that things will continue as they have—stalled and uncertain.

ZILLOW: Builders Cautious, Buyers Picky

New construction in June posted mixed results. Housing starts rose 4.6% from May but were still slightly down compared to last year at this time. Single-family housing starts fell in every region except the Midwest, where more affordable homes and favorable bargaining conditions kept demand somewhat steady.

A key issue: resale inventory is piling up. There are now more existing homes on the market than at any time since late 2019. This added competition, combined with higher costs, has made buyers more selective and sellers more flexible. In some cases, builders and sellers are using price cuts and incentives to move properties.

Zillow data also shows the median cost per square foot for new homes has slowed, rising only 1.8% year-over-year in May—down from 3.3% in April. Meanwhile, the nationwide housing shortage remains significant. Zillow estimates a 4.7 million home deficit, and a slowdown in new builds won’t help close that gap.

Inflation and Rates: Still Stuck

Mortgage rates ticked slightly upward in July, as inflation concerns continue to influence rate expectations. Zillow predicts rates will stay in the mid-6% range through year’s end, with affordability improvements likely to be slow and modest. In the meantime, home shoppers benefit from higher inventory and more negotiating power than they’ve had in recent years.

REDFIN: Buyers in Control, Sellers Getting Real

Redfin reports that buyers now hold most of the leverage. With more homes on the market than interested buyers, many deals are falling apart—often during the inspection phase. Buyers aren’t hesitating to walk away when a better home pops up or if issues are uncovered.

Financial stress is another big factor in cancellations. With home prices near record highs and mortgage payments still steep, some buyers are backing out once they fully grasp the monthly costs. Others are holding out in hopes that prices or rates will drop—even though that may not happen anytime soon.

Redfin expects home prices to drop 1% nationwide by the end of 2025, while mortgage rates remain around 6.8%. Sellers are adapting to this new landscape, often offering concessions or lowering prices to keep deals together.

Listings Down, Payments Dip

New listings have dipped again, reaching their lowest point in nearly two years. Some homeowners are choosing to rent out their homes rather than sell in a soft market. Still, the total number of homes for sale is up 12%, and sellers are increasingly realistic about pricing.

Redfin notes the smallest increase in asking prices this year. The gap between asking and final sale prices is also narrowing, suggesting that sellers are aligning more closely with buyer expectations. Monthly mortgage payments have dropped to a four-month low, offering a small break to those still in the market.

NAR: A Surge in Foreign Investment

International buyers re-entered the U.S. housing market in a big way this year, purchasing $56 billion worth of residential real estate between April 2024 and March 2025—a 33% increase from the prior year.

According to the National Association of Realtors®, international purchases hit 78,100 homes, up 44% from the previous period. Many foreign buyers paid in cash (47%) and focused on high-end properties, helping push the median purchase price to a record $494,400.

Top buyer countries included China, Canada, Mexico, India, and the U.K., with Florida, California, and Texas leading the way as favored destinations. NAR credits America’s strong private property protections and recovering global conditions as drivers of renewed interest.

Key Takeaways from July’s Housing Market

• Mortgage rates remain stuck between 6–7%, holding back a broader recovery.
• New listings are down, but total inventory is up—giving buyers more options.
• Buyers are walking away from deals more often, citing finances and flexibility.
• Redfin and Zillow both expect home prices to fall modestly by year-end.
• Foreign investment is growing again, with cash buyers targeting high-end markets.
• Affordability remains a major concern—buyers need a $17,000 raise to afford a typical home.

What It Means for You

This summer, homebuyers are finally seeing conditions shift in their favor. There’s more inventory to choose from, sellers are more flexible, and prices are softening—especially in overheated markets. But that doesn’t mean it’s easy. Affordability remains a major hurdle, and most households still need a substantial raise or larger savings to make a move.

At Nuvision, we’re keeping a close watch on the market so we can keep members well-informed. Whether you're looking to buy, sell, or simply understand your options, we’re here to help guide you through the process.