The U.S. housing market continues to face significant challenges as it enters 2025, marking the fourth consecutive year of a sales slump. Sales of previously occupied homes have stagnated at a historic low, totaling 4.06 million units last year, which remained unchanged from 2024. This performance marks the lowest sales level recorded since 1995, according to the National Association of Realtors (NAR). Since 2022, annual sales figures have consistently declined, reflecting ongoing difficulties in the housing sector.
Despite these low sales, the median national home price exhibited a slight increase, rising 1.7% to reach $414,400. This continued increase in home prices, alongside elevated mortgage rates, has created a challenging environment for potential homebuyers, with many unable to enter the market. Sales have hovered around the 4-million annual pace since 2023, significantly lower than the historical norm of approximately 5.2 million.
NAR’s chief economist, Lawrence Yun, commented on the turbulent year for homebuyers, highlighting the combination of record-high prices and historically low sales as formidable hurdles. However, he noted that conditions began to show some improvement in the fourth quarter of 2025, with lower mortgage rates and a slowdown in home price growth.
The slump in the housing market can be traced back to 2022, when mortgage rates began their ascent from the exceptionally low levels seen during the pandemic. A year ago, the average rate on a 30-year mortgage hovered around 7% but began to ease in late summer, dropping to close to 6% by the year’s end, as reported by Freddie Mac.
This reduction in mortgage rates provided a boost to home sales, particularly evident in December when existing home sales increased to a seasonally adjusted annual rate of 4.35 million units. This figure represents a 5.1% rise from November and marked the fastest sales pace in nearly three years, surpassing economists’ expectations.
In December specifically, home prices continued to climb, with the median sales price reaching $405,400—representing a 0.4% increase from December 2024. This also established a new all-time high for any previous December and marked the 30th consecutive month of annual increases in the median sales price.
Despite these improvements, affordability remains a significant barrier for many first-time homebuyers, who often lack equity from existing homes to apply towards new purchases. Additionally, uncertainty regarding the overall economy and job market has led numerous potential buyers to defer their home-buying plans, remaining on the sidelines as they navigate these challenges.
