Home sales struggle as prices and mortgage rates soar

In the United States, the housing market showed slight improvements in May 2025 despite ongoing challenges. Sales of previously occupied homes increased by 0.8% from April, reaching a seasonally adjusted annual rate of 4.03 million units, although this remains 0.7% lower than the same period last year. The National Association of Realtors reported that economic factors like high mortgage rates and rising home prices have significantly impacted affordability for homebuyers, which has hindered sales activity. The increase in inventory, with 1.54 million unsold homes available, represents a 20.3% rise from last May, yet it remains below the typical level before the pandemic. The impact of high mortgage rates has been significant, as they have added substantial costs to monthly payments for many borrowers. At this time, the average rate for a 30-year mortgage was close to 7%, a figure that has made homeownership increasingly difficult for many prospective buyers. Despite the slow growth rate of home prices, which have increased annually for 23 consecutive months, potential buyers are finding it more challenging to afford down payments due to their financial constraints. The surge in home prices has also outpaced wage growth, further complicating the home buying process. Real estate experts note that homes that are overpriced are likely to remain on the market for extended periods. For example, while the median sales price stood at an all-time high of $396,500 for the four weeks ending June 15, which reflected an increase, it still falls short of the median asking price, highlighting the gap between what homeowners hope to receive versus what buyers are willing to pay. Many buyers have entered a negotiating position, given the current economic landscape. The implications of these market conditions are concerning. Sales figures are not just reflective of buyer interest but also indicative of broader economic realities affecting individuals and families across the nation. With rising prices that have surged 52% since May 2019 against a mere 30% increase in median annual income during the same time frame, the prospect of homeownership for many appears to be diminishing even further. The challenges facing the U.S. housing market present a significant barrier to achieving stability for both buyers and the economy as a whole.