The Ten: A housing market stuck in place 

Editor's note: In a year of epic mergers — and industry division — a handful of people and themes have emerged as defining forces. Real Estate News has selected the top newsmakers of 2025, based on their industry impact and influence. They are The Ten.

For the wider U.S. economy, 2025 was marked by tumult as tariffs, the rise of investment in artificial intelligence and immigration crackdowns shook consumer confidence.

But in real estate, economists' expectations for the year generally came to pass, with the housing market remaining "stuck" — not much worse, not much better — while showing a few modest improvements.

Existing home sales are poised to eke out a small year-over-year increase, but at around 4.1 million sales, 2025's total will be among the lowest of the past 30 years. Inventory is up, although the climb has slowed in recent months. Price growth decelerated in 2025, falling behind the inflation rate in most local markets.

Meanwhile, 30-year mortgage rates held above 6%, bouncing mostly between 6.2% and 6.4% during the final months of the year after spiking above 7% in early 2025.

High costs, low mobility suppress home sales

Why is the housing market stuck? It largely boils down to affordability and a lack of mobility.

The market's fundamentals "are still strong," according to Lisa Sturtevant, chief economist at Bright MLS, but "affordability challenges are going to characterize the housing market for years." 

That's because although price growth has slowed, median home prices — which saw a huge surge during the pandemic — remain unaffordable to many buyers. Not even a shift to the most buyer-friendly market in more than a decade has been able to meaningfully bring prices down.

While affordability may be the most significant barrier to sales, mobility also plays an important role. Much of 2025 saw a low-hire, low-fire environment, particularly in the private sector. If people aren't changing jobs, that eliminates one of the key reasons for a move.

Another important contributor to low mobility? More than half of current mortgage holders are locked into a 30-year rate below 4%, according to Redfin data — and they have plenty of equity. Since most sellers typically leave one home to buy another, supply and demand has diminished as homeowners stick with the lower rates they nabbed during the pandemic.

"Why sell a home financed with a 3- or 4-percent mortgage rate and take on a new loan at a much higher rate? Doing so would increase monthly housing costs substantially," First American Deputy Chief Economist Odeta Kushi wrote in a Dec. 17 blog post.

The 'lock-in effect' anchor may be lifting

The likelihood of taking on higher housing costs has kept many homeowners from selling, pushing sales volumes down to 75% of 2020 levels — a situation that could persist through 2027, a recent Cotality analysis suggested.

The security of a low-rate mortgage "heavily anchors homeowners in place," Cotality Principal Economist Thom Malone said in the report. "Instead of prices adjusting when demand drops, sellers hunker down and try to wait out the downturn," he added.

Still, the lock-in effect is starting to wane: Nearly 20% of outstanding mortgages now carry rates above 6%, according to Mike Simonsen, chief economist at Compass. "The 10 million homeowners with higher-rate loans aren't anchored to a rate they'll never see again," Simonsen said. "They're free to move when life demands it."

Inventory ticked up — but so did delistings

Those who must sell are listing their homes, leading to some inventory growth. While prices have fallen in some markets, the drop hasn't been enough for many first-time or repeat buyers. As a result, many homes are spending more time on the market.

Some homeowners who need to move are finding other solutions that don't involve lowering their listing price, such as renting out their home instead. In the second half of 2025, these tactics led to thousands of sellers taking their homes off the market rather than reducing their asking price.

The market isn't terrible for everyone

Meanwhile, the upper-end luxury market posted greater sales numbers and higher prices. That matched this year's "K-shaped economy," where those in higher income brackets saw an active real estate market while sales were sluggish for the majority of home price points.

"It's a divergence — not just of prosperity, but it's also geography," said Simonsen, who recently noted that Northeastern housing markets look very different from those in the South and the Sun Belt.

'More breathing room' ahead for buyers, sellers

Despite these persistent challenges, most economists are expecting the market to continue moving toward a reset in 2026.

Forecasters generally predict that home sales will rise — although there's no clear consensus on how much. Mortgage rates are expected to tick down, while home prices will mostly stay flat.

"Buyers are benefiting from more inventory and improved affordability, while sellers are seeing price stability and more consistent demand," said Mischa Fisher, chief economist at Zillow. 

"Each group should have a bit more breathing room in 2026."