Editor’s note: This housing market forecast was last updated in July 2025 using the latest data and offers a one-year prediction extending into July 2026.
The U.S. real estate market is currently shifting toward neutral territory—and even toward buyer’s market territory in some metro areas.
Homes are staying on the market longer, with a higher percentage of price reductions and greater negotiating leverage for buyers.
That’s where we are now, but where are we headed? What’s the housing market forecast for the rest of 2025 and into 2026?
In short: Expect more of the same (a cooler market that increasingly favors buyers) with the possibility of small price declines in many cities.
Prediction 1: Home Prices Could Decline in Many Cities
A June 2025 report from Zillow confirmed a trend that many Americans have already experienced firsthand: the housing market has weakened.
Over the past year or so, home values dropped in 22 of the 50 largest U.S. metro areas. And last month, nearly 26% of real estate listings nationwide had a price reduction—a record for that month, according to Zillow.
The biggest home-price declines over the past year were in Austin (-5.5%), Tampa (-5.4%), Dallas (-3.4%), Phoenix (-3.4%), and San Antonio (-3.3%).
Looking forward, Zillow predicted the median home price in the U.S. would drop by 1% during the one-year period from June 2025 to June 2026.
Prices are falling in some markets due to a range of factors, but mostly these:
- Mortgage rates and affordability. Rates near 7% have pushed many buyers out of the market, reducing competition and putting downward pressure on prices.
- Inventory growth. Cities like Austin, Tampa, and Phoenix have seen a surge in real estate listings, creating a supply-demand imbalance with resulting price cuts.
- Buyer demand has cooled. Economic uncertainty, job concerns, and affordability issues are making many buyers hesitant, even as sellers slash prices.
- Price booms fizzling. Cities that saw major price growth during the 2020-2022 pandemic era are still settling back to normal.
- Local issues. Rising insurance costs, extreme weather risks, and shifting migration trends are weakening demand in places like Florida and parts of the Sunbelt.
Even the hotter housing markets across the U.S. could experience some moderation over the next year, with home-price growth slowing or stalling.
Prediction 2: Mortgage Rates Will Hover in Mid-6% Range
As of late July, the average rate for a 30-year fixed mortgage was hovering around 6.75%. That’s based on the weekly nationwide survey conducted by Freddie Mac.
On July 17, researchers from Freddie Mac wrote:
“The 30-year fixed-rate mortgage inched up this week and continues to stay within a narrow range under 7%.”
Some analysts and research groups expect mortgage rates to ease a bit through the rest of 2025, and possibly enter 2026 in the mid-6% range.
Fannie Mae’s economists currently project rates ending 2025 around 6.2% to 6.5%, and about 6.0% in 2026. Housing economist Lawrence Yun expects rates to settle near 6% by early 2026.
But even if mortgage rates decline slightly, as some have predicted, it probably won’t make a huge difference for the broader housing market. In many U.S. cities, home prices will have to come down in order to stimulate market activity.
In short: the era of very low, sub-5% mortgage rates is over. Even with Fed rate cuts, home loan interest rates are unlikely to return to pandemic lows anytime soon.
Prediction 3: A Shift Toward Neutral or Buyer’s Markets
The U.S. housing market is showing clear signs of shifting toward a more balanced or neutral state, according to numerous reports. With homes lingering longer on the market and more listings available, buyers now have more negotiating power.
Here are some recent findings that reinforce this idea:
- Surge in active listings: Active inventory reached 1.36 million in June—up 17% from a year earlier and the highest level since November 2019. This means buyers have more choices.
- Neutral market expanding: Zillow’s Market Heat Index now classifies the U.S. housing market—and 22 of the top 50 metro areas—as neutral, meaning buyers and sellers have roughly equal leverage. That’s nearly triple the number of neutral markets compared to a year ago, signaling a nationwide shift.
- Price cuts more common: Around 26.6% of listings received price reductions last month, the most for that month on record dating to at least 2018. This shows that sellers are more willing to negotiate, due to weaker demand.
- Slowing sales pace: Homes in many cities are staying on the market longer, causing a buildup of inventory. In June 2025, the nationwide median days on market increased to 53 days—five days longer than a year earlier and matching pre-pandemic patterns.
But these conditions can vary widely by region. Some parts of the country have a higher level of demand from buyers, giving sellers the edge. Other cities are seeing the exact opposite.
- Strong sellers markets persist in metros like Buffalo, Hartford, NYC, Minneapolis, and Providence.
- In contrast, buyer’s markets have emerged in cities like Miami, New Orleans, Jacksonville, Austin, and Tampa.
(See the “Regional Differences” below for more on this.)
Prediction 4: New Construction Will Increase Supply
After years of tight supply, new home construction is poised to recover.
A recent housing market forecast from the National Association of REALTORS (NAR) predicted that housing starts could total roughly 1.5 million units per year over the next couple of years. This should add to housing supply, especially in the Sunbelt and growing metro areas.
In the short term, however, inventory will remain below pre-pandemic norms, creating house-hunting challenges for many home buyers.
Freddie Mac says the “lock-in effect” (homeowners staying put with their 3%-4% mortgage rates) is easing, meaning more homes will eventually come on the market.
While real estate market conditions can vary widely by location, most metros across the U.S. have experienced inventory growth over the past year.
According to a recent report from Realtor.com:
“Inventory grew in all four major U.S. regions in June, with the West seeing a 38% jump and the South up nearly 30%. Every one of the top 50 metros posted active inventory gains year over year, led by Las Vegas (+77.6%) and Washington, D.C. (+63.6%).”
Regional Differences You Should Know About
The U.S. real estate market actually consists of hundreds of metro-level micro markets, with conditions varying widely from one to the next.
For this reason, housing market forecasts can vary as well. Here are some key differences by region, with long-range predictions for each:
Sunbelt and Fast-Growing Metros
Cities that boomed during the pandemic (e.g. Austin, Phoenix, parts of Florida) are expected to cool markedly—or continue cooling. Recent data show that many of these markets are already seeing price declines as inventory builds and demand wanes.
Through the rest of this year and into 2026, formerly hot Sunbelt housing markets will likely see flat home prices or slight declines.
West Coast and California
Supply‐constrained coastal real estate markets (like San Francisco, Los Angeles, Seattle, and San Diego) remain among the most expensive in the country.
These markets saw particularly steep price spikes in 2020-22, followed by sharper pullbacks in late 2022-2023. Going forward, experts expect very modest growth or price plateaus in these metros.
Limited new supply will keep values high, but high mortgage rates and affordability pressure suggest that home sales will stay sluggish.
In many West Coast metros, higher inventory levels (relative to 2021) have given buyers a bit more leverage than before.
Northeast and Midwest
More affordable real estate markets (like older suburbs in upstate New York and parts of the Midwest) experienced more moderate price growth in recent years and less construction.
These areas tend to have tighter supply levels today, so prices are holding up better.
Many housing forecasts expect continued but modest price growth in these regions. Many Midwestern and Northeast metros are still seeing year-over-year price gains as inventory remains tight.
5 Key Takeaways From This Report
- Home prices are falling in many cities. Over the past year, values dropped in nearly half of the largest U.S. metro areas. More price declines are expected in 2025–2026, especially in the Sunbelt and pandemic-boom cities.
- Mortgage rates will likely stay in the 6% range. Rates are expected to remain between 6.0% and 6.5% through 2026—not low enough to spark a major rebound in demand.
- The market is shifting toward buyers. Homes are sitting longer, more listings are seeing price cuts, and active inventory is up—giving buyers more leverage in many areas.
- New construction is increasing supply. More homes are being built, especially in the South and West, helping ease inventory shortages but still below pre-pandemic norms.
- Conditions vary by region. Some markets (like Buffalo and NYC) remain strong for sellers, while others (like Austin, Tampa, and Phoenix) have clearly tipped in favor of buyers.
Sources: To create this report, we curated housing market insights from Fannie Mae (Economic & Housing Outlooks), Freddie Mac (Economic Outlooks), and the National Association of REALTORS®, among others. These include recent projections for sales volumes, home price index changes, mortgage rate predictions, and inventory trends.
Disclaimer: This report contains real estate market forecasts issued by third parties not associated with the publisher. Such forward-looking views are the equivalent of an educated guess and should be treated as such.
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