Under the dual pressure of high housing prices and high interest rates, the US housing market has already entered a deep recession in 2025. Data shows that US home sales hit a record low in November. According to Redfin, home purchases plummeted 35% year-on-year that month, the largest decline since data collection began in 2012. More seriously, data released by the National Association of Realtors (NAR) on December 21st showed that existing home sales in November had fallen for 10 consecutive months, the longest such streak on record, with the month-over-month decline widening to 7.7%.
△ Sales Volume Decline
Kashif Ansari, co-founder and CEO of Juwai IQI, a real estate technology group, revealed in an interview with 21st Century Business Herald that the pace of home price increases is slowing, and overall prices are expected to decline next year. Furthermore, as potential homebuyers wait and see market trends and choose not to purchase, they are turning to the rental market, a trend that is likely to further drive up rental prices.
Under the influence of the Federal Reserve's aggressive interest rate hikes, the US housing market is inevitably heading for a sharp cooling. Month-over-month declines have occurred several times this year, and the probability of a year-over-year decline next year is increasing. The question now is: will housing prices plummet next year?
△ Buyers and sellers adopt a wait-and-see approach
Data from the National Association of Realtors (NAR) shows that existing home sales totaled 4.09 million units in November, a 35.4% year-over-year plunge, far below the expected 4.2 million units. The month-over-month decline was also 7.7%, a further increase from the 5.9% drop in October. Excluding the outliers from the early stages of the 2020 pandemic, US existing home sales in November fell to their lowest level since November 2010.
Concurrently, sales of high-priced homes have suffered the most. High-priced homes, which once led the gains during the post-pandemic period of low interest rates, are now bearing the brunt of the decline. In November, sales of homes across all price categories declined, but sales of homes priced over $1 million plummeted by a staggering 41% year-over-year. NAR Chief Economist Lawrence Yun noted that the residential real estate market in November was frozen, with sales activity similar to that seen during the economic shutdown at the beginning of the pandemic in 2020. The rapid rise in mortgage rates this year has hurt housing affordability, reducing homeowners' incentive to list their homes, and causing available housing inventory to remain at historically low levels.
△ Slowing Home Price Growth and Expectations
Although US mortgage rates have recently fallen for six consecutive weeks, reaching a nearly three-month low, the decline in borrowing costs is still insufficient to revive the market. Buyers and sellers are cautiously waiting and remaining highly vigilant about the economic outlook and the trajectory of interest rates and prices over the next year.
The US real estate market is currently extremely quiet, with buyers and sellers retreating. Zillow data shows that the number of homes listed by sellers plummeted 24% year-over-year in October, marking the fourth consecutive month of decline. Meanwhile, homebuying demand remains sluggish, currently down to 17% compared to pre-pandemic levels in October 2019.
Currently, only households with an annual income of over $100,000 can afford a median-priced home, making it difficult for real estate agents to find suitable buyers. Convincing homeowners to sell their properties is also becoming increasingly challenging. For many families upgrading, giving up the low 3% mortgage rates they enjoyed in the past two years for higher rates is an unrealistic option.
The continued cooling of the housing market has unnerved many sellers, who are choosing to reduce their prices or exit the market altogether. Redfin data shows that the median U.S. home sale price rose only 2.6% year-over-year in November, the smallest increase since May 2020. Meanwhile, new listings plummeted 28% year-over-year, the largest drop since April 2020.
Although the median existing home price in the U.S. rose 3.5% year-over-year to $370,700 in November, marking the 129th consecutive month of year-over-year increases, the gains have narrowed significantly, far below the double-digit increases seen earlier this year. After peaking at $414,000 in June, home prices have been declining month-over-month for several consecutive months. However, due to tight housing supply, approximately 23% of homes still sell for above their listed price.
The current market environment is particularly challenging for first-time homebuyers in the United States. In November, first-time buyers accounted for 28% of total sales, the same as in October. This figure reached 29% between July and September of this year. Historically, first-time buyers typically account for approximately 40% of the market. Current data suggests that many first-time homebuyers are being priced out of the market due to the combined impact of high housing prices and high interest rates.
For the US housing market, the direction of the Federal Reserve's monetary policy will determine the future trajectory of housing prices. Since its inception in March of this year, the Fed has hiked interest rates seven times, totaling 425 basis points, to a current rate range of 4.25% to 4.5%. With another 50 basis point interest rate hike this month, Federal Reserve Chairman Powell said that curbing inflation still requires work, which means mortgage costs are likely to continue to climb, putting more pressure on potential homebuyers.