An industry report also shows a record number of sale cancellations
of ConsumerAffairsMay 27, 2025
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Redfin forecasts a 1% year-over-year decline in U.S. home-sale prices by Q4 2025.
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Rising inventory and cooling demand are tipping the housing market in favor of buyers.
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Home-purchase cancellations hit the second-highest April rate on record, signaling buyer uncertainty.
Homebuyers who have been priced out of the market by rising mortgage rates and record high home prices may be about to get some relief. The decline in prices seen recently in some of the most expensive housing markets could become a nationwide trend by the end of 2025.
A new report from real estate broker Redfin predicts prices will level off in the third quarter before declining by an average of 1% by the end of the year. If the forecast comes to pass, it will mark one of the first substantial drops in home values since 2012, not counting a brief dip in 2023.
In recent months, home sales have declined, but the median home price has continued to rise. However, that market dynamic may be shifting. According to Redfin, the housing market is increasingly favoring buyers, with rising inventory and cooling demand creating a softening landscape.
Inventory levels surged 16.7% year over year in April to a five-year high, with new listings jumping 8.6%. Meanwhile, homebuying demand has tapered off, with sales of existing homes slipping 1.1% annually and the average home taking 40 days to sell, five days longer than the year before.
Making concessions and cutting prices
This imbalance is pressuring sellers to make concessions or reduce prices. Nearly half of home sellers are offering perks like mortgage-rate buydowns or funds for repairs, close to a record high. Redfin agents have advised buyers to focus on homes that have lingered on the market, as those properties are more likely to yield negotiation opportunities.
A lot of sellers are still emotionally tied to the peak prices of 2021 and 2022, said Corey Stambaugh, a Redfin Premier agent in North Carolina. But after a few weeks with no offers, reality sets in and theyre willing to negotiate or offer concessions.
While a 1% price drop and mortgage rates hovering around 6.8% may not seem like game-changers, homebuying could become marginally more affordable thanks to rising wages, which are increasing at roughly 4% annually.
Redfins head of economic research, Chen Zhao, cautioned that buyers shouldnt wait too long in hopes of a dramatic price drop. Negotiation power is already in buyers hands, Zhao said. Waiting might not save much, but acting now allows for equity building to begin sooner.
While listing prices may decline, mortgage rates probably wont. Rates are expected to remain near 6.8% through the end of 2025, primarily due to macroeconomic factors like tariffs and a growing U.S. budget deficit. Although the Trump administration recently rolled back some tariffs on Chinese goods, overall tariffs remain high and unpredictable, discouraging the Federal Reserve from making cuts.
Redfin notes that only a full repeal of recent tariff hikes or a severe economic downturn would likely trigger significant mortgage rate reductionsneither of which appears imminent.
Contract cancellations
In another indicator of market softening, roughly 56,000 U.S. home-purchase agreements were canceled in April, representing 14.3% of all pending deals, second only to April 2020, when the pandemic abruptly paused the market.
Buyers are increasingly backing out due to economic jitters and high costs, confident they can find better deals later amid record-high inventory levels.
Five of the top ten metro areas with the highest cancellation rates in April were in Florida, led by Orlando (19.4%) and Tampa (19.1%). Factors include rampant homebuilding, rising natural disaster risks, and soaring insurance and HOA fees.
On the flip side, the Northeast showed more resilience, with Nassau County, N.Y. logging the lowest cancellation rate at just 4.8%.
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