(NASDAQ: RDFN)—Redfin economists expect the median U.S. home-sale price to fall flat in the third quarter, and fall 1% year over year by the fourth quarter. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. Redfin expects mortgage rates to remain elevated near 7% for the remainder of the year.
This marks a stark reversal from years of home-price increases. Aside from a brief period in 2023, home prices have been rising year over year since 2012 due to a prolonged seller’s market.
Redfin also issued a report today about the rise in home-purchase cancellations, which is discussed further down.
Sale Prices Will Decline Because Inventory Is Rising While Sales Are Falling
Home prices are expected to decline nationwide because there are more home sellers than homebuyers in the market. Homebuying demand is down, sales of existing homes fell 1.1% year over year in April to a six-month low, and the typical home that did sell took 40 days to do so–five days longer than a year earlier. On the selling side, total inventory rose 16.7% year over year to its highest level in five years, and new listings rose 8.6%.
The U.S. housing market has been lackluster since mortgage rates rose sharply at the start of 2022, and has slowed further in the last several months due to widespread economic instability and stubbornly high housing costs.
More homes for sale, combined with fewer people interested in buying them, is expected to push U.S. sale prices down in two key ways:
Redfin agents advise buyers looking for a deal to target homes that have been on the market for more than a few weeks. Those offer a shot at negotiation: Buyers should submit offers for under list price and/or ask for concessions, like mortgage-rate buydowns or money for repairs. Nearly half of today’s sellers are giving concessions, just shy of the highest level on record. Sellers should price their homes in line with the market from the start to avoid price drops. Some sellers may consider pricing slightly under comparable homes in the same neighborhood to entice buyers.
“A lot of the people selling right now bought in 2021 or 2022, when home prices were near their height. Even though we advise them to list at today’s market value, a lot of them decide to list high to recoup their money,” said Corey Stambaugh, a Redfin Premier agent in North Carolina. “But those sellers face reality once their home has been sitting for a couple weeks without any offers. At that point, they’re willing to seriously consider low offers and even throw in some concessions, because they’d rather sell today than face the uncertainty of tomorrow.”
While Redfin economists expect the national median home price to decline 1%, prices will decline more in some metro areas and prices will likely continue rising in parts of the country where demand is holding up better, like the Midwest and the Northeast.
Buying a Home Will Become More Affordable Because Wages Are Expected to Rise While Prices Fall
Homebuying affordability will improve a bit more than a 1% price decline and flat mortgage rates suggest. That’s because incomes are expected to keep going up while home prices come down.
If home prices do decline 1% year over year and wages continue increasing at the current rate of around 4%, affordability will improve.
Still, for house hunters looking to buy soon, waiting until the end of the year for prices to fall slightly is unlikely to pay off. “We know there’s room to negotiate right now, so that’s the best way to take advantage of the changing market,” said Chen Zhao, Redfin’s head of economics research. “And the sooner you buy, the sooner you start to build equity.”
Mortgage Rates Expected to Remain Around 6.8% Until the End of 2025
Redfin expects the weekly average mortgage rate to remain right around 6.8% through the rest of the year.
Zhao said mortgage rates are staying stubbornly high mainly because of two economic concerns: Tariffs, which drive up the price of goods and discourage the Fed from cutting rates, and the rising U.S. budget deficit, which has caused analysts to downgrade the country’s credit.
Although the Trump administration recently slashed its proposed tariffs on China, they are still three times higher than at the beginning of the year and there are still high tariffs on goods from other countries. Additionally, the back-and-forth on the policy has exacerbated economic uncertainty for both the Fed and American consumers.
Alternatively, mortgage rates could fall into the 5 to 5.5% range by the end of the year if President Trump further dials back plans for tariffs.
“One of the only things that could drive rates down is if the administration eliminates all of the new tariffs and makes it clear they’re not coming back,” Zhao said. “Rates could also drop if the country dips into a severe recession. But that is less likely now that the trade war has been scaled back, and it would be counterproductive for house hunters because even though mortgage rates would be lower, many buyers would have less money to buy a home.”
U.S. Home Purchases Were Canceled at the Second Highest April Rate on Record
Another sign that the housing market is softening: Buyers are getting cold feet.
In addition to its price forecast, Redfin today published a report finding that roughly 56,000 U.S. home-purchase agreements were canceled in April—equal to 14.3% of homes that went under contract that month. That’s up from 13.5% a year earlier and is the highest April share in records dating back to 2017, with the exception of April 2020, when the coronavirus brought the housing market to a halt. Home purchases are falling through because buyers are grappling with economic uncertainty and the shock of high housing costs. Many have confidence that they’ll be able to find a home that better suits their needs later on because inventory is at a five-year high and it’s a buyer's market.
Outbid Buyers Can Ask Their Agent to Find Out If the Seller Is Accepting Backup Offers
In cases where the deal does fall through, one buyer’s loss can be another’s gain, pointed out Alison Williams, a Redfin Premier real estate agent in Sacramento, CA.
“Two of my buyers have won deals this way—where the previous buyer canceled and then we wrote an offer before the home was even back on the market, and the seller accepted,” Williams said. “It’s a tactic that has been working really well, especially when it’s a home my client was already interested in. I will circle back with the listing agent to see if the other buyer is wavering.”
Florida Is Home to 5 of the 10 Metros With the Highest Cancellation Rates
Atlanta leads the nation in canceled deals, with one in five (20%) of April’s pending home sales canceled. It’s followed by Orlando (19.4%), Tampa, FL (19.1%), Riverside, CA (19.1%) and Miami (18.9%). Rounding out the top 10 are Fort Lauderdale, FL (18.9%), Fort Worth, TX (18.7%), Las Vegas (18.6%), Jacksonville, FL (18.4%) and San Antonio (18.2%).
Of the 10 metros with the highest cancellation rates, five are in Florida and two are in Texas. The two states have been building more homes than anywhere else in the country, prompting some buyers to back out of deals because they’re confident they will be able to find a different home that works better for them. Florida has more homes for sale than ever before. Some buyers in the Sunshine State are also getting cold feet due to increasing natural disasters and soaring insurance and HOA fees.
The lowest cancellation rate was in Nassau County, NY, where 4.8% of April pending home sales fell through. Next came Boston (8.1%), Montgomery County, PA (8.1%), Minneapolis (8.4%), New York (8.7%), Milwaukee (9.2%), Seattle (9.8%), Newark, NJ (9.8%), Warren, MI (10.4%) and New Brunswick, NJ (10.5%).
Anaheim and Seattle Saw the Biggest Increases in Cancellations
In Anaheim, CA, 15.7% of home-purchase agreements fell out of contract in April, up 3.1 percentage points from 12.6% a year earlier—the biggest increase among the major U.S. metros Redfin analyzed. Next came Seattle (2.8 ppts), Milwaukee (2.7 ppts), Los Angeles (2.6 ppts) and Nashville (2.6 ppts).
Just 10 metros Redfin analyzed saw home-purchase cancellations decline, led by Detroit (-3 ppts), Jacksonville (-1.3 ppts), Portland, OR (-1 ppt), Cleveland (-0.6 ppts) and West Palm Beach (-0.4 ppts).
To view the full reports, please visit: https://www.redfin.com/news/home-price-forecast-decline-2025 for Redfin’s updated housing market forecast and https://www.redfin.com/news/home-purchase-cancellations-april-2025 for April home purchase cancellations.
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We run the country's #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.
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