2025 Mid-Year Housing Check-In: What Buyers and Sellers Need to Know Now

Remember the wild days of 2021 when houses were selling within hours of listing, often for tens of thousands above asking price? Those days feel like ancient history now. As we hit the midpoint of 2025, the real estate landscape has transformed dramatically, settling into what many industry experts are calling "the new equilibrium."

I was talking with a client last week who's been waiting three years for the "perfect time" to buy. "There's never a perfect time," I finally told her. "There's just the right time for you." And that's the truth of today's housing market – it's not uniformly good or bad, but rather a mixed bag of challenges and opportunities that vary widely depending on your situation, location, and goals.

The pendulum that swung so dramatically toward sellers during the pandemic has now found a more balanced position, though it's not quite at center, especially in different localities. For instance, prices are decreasing in Austin, TX but still increasing in Scottsdale real estate. Let's dive into what's happening and what it means for you.

Home Sales: A Market Finding Its Rhythm

If the pandemic-era market was a frenzied rock concert, today's market is more like a jazz club – still lively, but with a more measured tempo and room for improvisation.

Existing home sales have picked up slightly compared to this time last year, with the National Association of Realtors reporting a 3.2% increase in monthly transactions. However, we're still operating at about 75% of what was considered normal before the pandemic. This despite the economy adding over seven million jobs during the same period – a disconnect that reveals how deeply affordability issues are affecting potential buyers.

"The market is experiencing what I'd call 'suspended animation,'" explains Marco Jefferson, a real estate analyst with Urban Housing Institute. "There's clearly demand – people want to buy homes – but the financial realities are keeping transactions below what the strong job market would typically support."

This suspended animation is creating what economists call "pent-up demand" – a reservoir of potential buyers waiting for the right conditions to jump in. Some are waiting for mortgage rates to fall, others for prices to drop further, and many for both.

Interestingly, higher-priced homes ($750,000+) are seeing more activity than the entry-level market. This suggests that affluent buyers, less affected by interest rate changes, are still making moves while first-time homebuyers are feeling the pinch most acutely.

For everyday families, the math is stark. A household earning the median income could afford about 50% of homes on the market before the pandemic. Today, that same family can afford just 20% of available homes. This affordability crisis is reshaping who can buy and where.

Mortgage Rates: The New Ceiling Becomes the Floor

Remember when 4% mortgage rates seemed high? Those days are firmly behind us. Currently, 30-year fixed rates are hovering around 6.8%, and while this represents a drop from the 7.5% peaks we saw earlier, it's still more than double the pandemic-era lows.

"I've been in this business for 26 years," says mortgage broker Samantha Chen, "and I've had to completely reframe the conversations I have with clients. What used to be a 'high' rate is now just 'the rate.'"

The Federal Reserve's battle against inflation has directly impacted mortgage markets, and while inflation has cooled, rates haven't fallen as quickly as many hoped. NAR's Chief Economist Lawrence Yun projects rates will average about 6.4% in the second half of 2025, which would provide some relief but nothing close to the sub-3% era that many buyers still reminisce about.

This rate environment has created a phenomenon known as "rate lock" – where current homeowners who secured ultra-low rates during 2020-2021 are reluctant to sell and take on a new mortgage at today's higher rates. This has contributed to inventory shortages in some markets, particularly for mid-range family homes. As soon as rates went so low I knew this was going to happen. If you have around a 3% mortgage, you'd have to have a pretty good reason to sell your current place and move to a new one with more than double the interest rate.

Creative financing has made a comeback as a result. Adjustable-rate mortgages (ARMs) now represent about 12% of new loans, up from just 3% during the pandemic. Seller financing, rent-to-own arrangements, and assumable loans are all seeing renewed interest as buyers seek alternatives to traditional high-rate mortgages.

Mortgage rate buydowns – where sellers contribute to temporarily lower the buyer's interest rate – have become a popular concession. Instead of lowering the listing price, some sellers are offering to "buy down" the buyer's rate by 1-2% for the first few years, making monthly payments more manageable during the critical early period of homeownership.

Inventory: The Scales Tip Toward Buyers

Perhaps the most dramatic shift in 2025's housing market is the inventory situation. After years of critically low supply, homes are now staying on the market longer, and the number of available properties has increased substantially in many regions.

Recent data shows there are now 33.7% more active sellers than buyers – a complete reversal from the pandemic years when multiple buyers competed for every listing. This shift is particularly pronounced in former pandemic boomtowns, where remote work fueled unsustainable price growth.

"What we're seeing is a correction, not a crash," explains real estate economist Daria Williams. "Markets that experienced 40-50% price growth during the pandemic are naturally seeing more inventory accumulate as prices adjust to more sustainable levels."

The South and West Coast have led this inventory comeback. Cities like Austin, areas of Phoenix, and San Diego now firmly favor buyers, with homes sitting on the market an average of 45-60 days compared to the mere 10-15 days that was common in 2021. In these areas, price reductions have become the norm rather than the exception, with about 42% of listings seeing at least one price cut before selling.

The Midwest and Northeast are seeing more modest inventory gains, with their markets remaining relatively balanced between buyers and sellers. Cities like Indianapolis, Columbus, and Philadelphia continue to see homes move relatively quickly, especially in desirable school districts.

For buyers, this inventory expansion means more choices and less pressure. Gone are the days of making offers sight unseen or waiving inspections out of desperation. Today's buyers can take time to visit multiple properties, consider options carefully, and even negotiate repairs or concessions – luxuries that seemed unimaginable just a few years ago. But before thinking this is the norm everywhere, make sure you ask your agent about days on market and if the area you're interested in is having quick sales with multiple offers.

Home Prices: A Gentle Descent, Not a Freefall

After years of double-digit annual price growth that defied gravity, home values are now following a more logical trajectory. The national median home price stands at $412,000, representing a 1.2% decrease from this time last year. However, Scottsdale real estate shows a median sold price for June 2025 of $920,000, which is a 3.3% increase month over month. In June 2024, the median sold price was $850,000, showing a 12-month increase YTD of 8.24% - no decrease here!

This modest price decline masks significant regional variations. While prices have fallen 5-10% in former boom markets like Austin, parts of Phoenix, and parts of Florida, they've actually increased 2-4% in parts of the Midwest and Northeast, where growth during the pandemic was more restrained. And as in the above paragraph, there are other Phoenix area suburbs that are still increasing in price.

"Real estate has always been local, but that's never been more true than now," says appraiser Malcolm Jenkins. "I'm seeing neighborhoods just miles apart with dramatically different price trends depending on job opportunities, housing stock, and even school quality."

The luxury market has seen larger adjustments, with high-end properties ($1 million+) taking price cuts of 10-15% in some areas. Meanwhile, the entry-level market remains relatively stable due to chronic undersupply of affordable homes – a structural issue that predates the pandemic and continues to support prices at the lower end.

Construction costs remain elevated, which puts a floor under new home prices. Materials are 22% more expensive than pre-pandemic, and labor costs have increased even more. This means even as market conditions soften, builders can't slash prices dramatically without operating at a loss. However, they can add more attractive financing options, bonuses, and rates. In some areas near Phoenix, you can build new for the same price or less than exisiting homes nearby, and with better rates than you could get with a regular mortgage provider.

The good news for current homeowners is that the massive equity gains from 2020-2023 remain largely intact. The average homeowner who purchased before 2020 still has substantial equity despite recent modest price declines.

Regional Spotlight: Where Opportunity Knocks

The end of "work from anywhere" policies has dramatically reshaped regional markets. As companies call employees back to offices, at least part-time, the appeal of distant suburbs and rural retreats has diminished.

The Midwest has emerged as a relative bright spot, offering a compelling combination of affordability and economic stability. Cities like Indianapolis, Columbus, and Kansas City are seeing steady demand, especially from first-time buyers priced out of coastal markets.

"We're seeing reverse migration," explains demographer Elena Sanchez. "People who fled to Florida or Arizona during the pandemic are now returning to their home states as remote work options diminish and those hot markets cool."

The Northeast continues to face inventory challenges, particularly in suburban areas within commuting distance of major employment centers. Here, price declines have been minimal, and well-maintained homes in good school districts still move quickly.

The most dramatic shifts are occurring in the Sun Belt, where pandemic-era growth has reversed course. Las Vegas, Phoenix, and Austin have seen significant slowdowns, with homes taking three times longer to sell compared to 2021 peaks.

Strategies for Today's Buyers

If you're in the market to purchase a home, today's conditions offer advantages that were unthinkable during the pandemic frenzy:

1. Leverage contingencies again: You can now include inspection, financing, and even sale contingencies without automatically losing out to competing offers.

2. Negotiate repairs and concessions: Sellers are increasingly willing to cover closing costs or address inspection issues rather than lose a serious buyer.

3. Consider "stale" listings: Homes that have been on the market 30+ days often represent the best value, as sellers become more motivated and realistic about price.

4. Look beyond the list price: Focus on the monthly payment and your long-term plans. A slightly higher rate on a well-priced home might make more sense than waiting for rates to fall while prices potentially rise again.

5. Explore creative financing: Interest rate buydowns, adjustable-rate mortgages, and even seller financing can make homeownership more affordable in the current rate environment.

Seller Strategies in a Shifting Market

If you're planning to sell, today's market requires a more thoughtful approach than the "list it and they will come" days of 2021:

1. Price realistically from the start: The data is clear that homes priced correctly initially sell faster and often for more than those that require price cuts after sitting on the market. Let that sink in - if you price it correctly in the beginning, you'll probably have a quicker sale at more money than if you let it sit at a too high price and have to start taking price reductions. I have witnessed this on so many occasions over my 42 years in real estate. I have told sellers the price they should list at and if they didn't agree I might have taken their listing if it was really nice and had the potential to sell if the seller reduced down the road, or I said "Thanks for your time" and left. I have seen sellers go through 5+ different agents until - guess what - the house ended up selling for what I told them months or more prior.

2. Invest in presentation: Professional photography, staging, and pre-listing inspections matter more than ever when buyers have choices. I provide professional photos and free staging advice.

3. Consider strategic concessions: Rather than dropping your price, offering to buy down the buyer's interest rate or cover closing costs can be more effective at attracting offers.

4. Be flexible on timing: Accommodating a buyer's preferred closing timeline can sometimes be more valuable than holding firm on price.

5. Target your marketing: Generic listings get generic results. Work with your agent to identify and reach the most likely buyers for your specific property. I offer a comprehensive marketing and advertising plan.

Looking Ahead: What's on the Horizon?

While no one has a crystal ball, several factors will likely influence the market through the remainder of 2025:

The Federal Reserve has signaled additional rate cuts if inflation continues to moderate, which could gradually bring mortgage rates closer to 6% by year-end – still high by historical standards but an improvement from current levels.

Election-year uncertainty typically dampens major financial decisions, suggesting the current measured pace of sales may continue through fall before potentially picking up in early 2026.

New construction, while improving, remains insufficient to address the structural housing shortage. Builders are focusing primarily on the middle and upper segments of the market where margins are better, leaving the affordable housing gap largely unaddressed.

Demographics continue to favor housing demand longer-term. Millennials are entering their prime home-buying years, and immigration has rebounded to pre-pandemic levels, creating household formation that will eventually translate to housing demand.

Making Your Move in Today's Market

The best real estate decisions have always been personal, not just financial. Today's market offers something rare: time to make thoughtful choices aligned with your life goals rather than being pressured by a frenzied market.

The best real estate decisions have always been personal, not just financial. Today's market offers something rare: time to make thoughtful choices aligned with your life goals rather than being pressured by a frenzied market.

For first-time buyers who've been waiting, the combination of increased inventory, reduced competition, and potential rate improvements later this year creates a window of opportunity worth exploring.

Move-up buyers face a trade-off: selling in a softer market but also buying with more options and negotiating power. The net effect often favors making a move, especially if your current home no longer meets your needs. If you're downsizing, especially if you can now purchase with cash, you're in an excellent position.

Investors are finding opportunities in markets that have seen the largest corrections, particularly in the single-family rental space where demand remains strong from those unable or unwilling to purchase in the current environment.

Whatever your real estate goals, working with a knowledgeable local agent has never been more valuable. National trends provide context, but your specific market might be behaving quite differently from the headlines, as I pointed out here for Scottsdale. A professional can help you interpret local conditions and craft a strategy that works for your unique situation.

The frenzy is over, but the opportunity remains – especially for those who approach today's market with clear eyes, realistic expectations, and a long-term perspective. If you're looking to buy in the Greater Phoenix area including Carefree, Cave Creek, North Phoenix, Scottsdale, and other surrounding areas, give Judy Orr a call at 480-906-1500.