#USHouseMarketStructureDraft The U.S. housing market in 2025 is facing significant challenges due to high prices, limited supply, and rising mortgage rates.
Currently, the market is short by about 1.5 million homes, leading to increased competition and higher prices. In over 230 cities, starter homes now cost $1 million or more, nearly triple the price from five years ago. This affordability crisis is pushing first-time buyers out of the market.
High mortgage rates, averaging 6.76%, are deterring both buyers and sellers. Many homeowners with lower locked-in rates are hesitant to sell, reducing market activity.
In response to rising costs, Americans are opting for smaller homes. The average home size listed for sale decreased to 1,800 sq ft in March 2025, down 7% from March 2020.
Institutional investors are purchasing single-family homes at scale, converting them into rentals. This trend reduces the inventory available for individual buyers, further driving up prices.
Overall, the U.S. housing market is characterized by high demand, limited supply, and affordability challenges, affecting both buyers and sellers.