Buyers gaining advantage in U.S. real estate market

Andrea Riquier

USA TODAY

The housing market has been on a roller coaster for the past several years, but as the ride slows to a crawl, home prices and some other measures are likely to come back to earth. Here’s what to know about some of the most important aspects of the market:

Price gains will slow

Home prices surged during the pandemic – up roughly 50% over the last five years, depending on which gauge you use – as mortgage rates hit rock-bottom and Americans reconsidered where they wanted to live.

Such big gains have had consequences. Homeowners are sitting on record levels of home equity, but it’s increasingly challenging for buyers, especially first-timers, to break into the market.

But now prices are falling back to earth, and may continue to do so. The Mortgage Bankers Association expects prices to rise only 1.3% in 2025, while Fannie Mae economists forecast a 4.1% price gain.

What’s different now is that more homeowners seem to be ready to list their homes for sale. For the past several years, one of the strongest forces acting on the housing market has been the mortgage rate 'lock-in' effect, whereby homeowners with rock-bottom rates were reluctant to move and take on much higher borrowing costs.

As of the fourth quarter of 2024, the most recent data available, 72% of all outstanding mortgages had a rate below 6%, and more than half had a rate below 4%.

But now, according to anecdotal evidence, some of that reluctance is easing. Redfin real estate agent David Palmer sees it in Seattle, where he works. 'There are so many people that post pandemic are like, OK, rate be damned,' Palmer said.

Selma Hepp, chief economist for real estate data firm Cotality, says the thaw is happening much more quickly than most analysts had anticipated. 'Maybe it’s the spring homebuying season,' she said.

Whatever the reason, there are a lot more options for buyers now. Realtor.com data shows that in April, there were 959,251 active listings, more than 30% higher than April last year, and nearly as high as 2019 levels.

That means buyers may finally get a break after several years of frenzied sellers’ markets, Palmer told USA TODAY. 'I do think this can be a good opportunity for people looking to buy. First-timers can actually negotiate something,' he said. It’s also a positive for people looking to trade up, he said, since a slower-paced market makes it easier to weigh the options.

It’s too soon to call this a buyer’s market – and experts like Hepp caution that the national housing market is, in fact, increasingly local, with some areas experiencing outsize demand while others weaken.

Still, Realtor.com data shows more sellers are making price cuts. In April, 18% of home listings had price reductions, the highest April share in Realtor.com data going back to at least 2016.

'This trend suggests that sellers are adjusting their expectations in the face of affordability challenges and weaker buyer demand in some markets,' Realtor.com economists wrote in an April analysis.