After several years of surging home prices and limited inventory, the U.S. housing market is showing early signs of a shift. As more homes come onto the market, buyers are finally gaining some leverage, and the longstanding seller’s market is beginning to cool. Analysts from firms like Zillow and Redfin now expect home prices to dip slightly by late 2025, with Zillow forecasting a 1.7% decline between March 2025 and March 2026 and Redfin predicting a 1% drop in the fourth quarter of this year. This marks a notable reversal from earlier projections, which anticipated continued price growth throughout 2025.
The main driver behind this change is the steady rise in housing inventory. More homes are being listed, and new construction is adding to supply, giving buyers more options and reducing the urgency that fueled bidding wars in recent years. According to the National Association of Realtors, the supply of homes for sale in April 2025 was up 20.8% from a year earlier, though it remains just below the level needed for a fully balanced market. As inventory increases, competition among sellers intensifies, leading to longer time on the market and, in many cases, price reductions or incentives to attract buyers. Despite these shifts, affordability remains a challenge. Mortgage rates have hovered near 7% for much of 2025, and while some experts expect rates to moderate, few predict a return to the ultra-low rates seen during the pandemic anytime soon. This means that while prices may soften, monthly payments for buyers are likely to remain elevated, keeping some would-be buyers on the sidelines.
Regionally, the impact will vary. High-cost areas and markets with rapidly rising inventory, such as parts of California and the West, are more likely to see price declines, while regions with tighter supply may continue to experience modest price growth or stability. For sellers, this environment may require more flexibility on price and terms, while buyers could find new opportunities—especially among new-construction homes, where builders are increasingly offering discounts and incentives.
Overall, the U.S. housing market is unlikely to experience a dramatic crash, but the era of relentless price increases appears to be winding down. As inventory continues to rise and mortgage rates remain elevated, a period of slower price growth—or even modest declines—seems likely through the end of 2025 and into 2026.
