The Shifting U.S. Housing Market: Buyer Power on the Rise as Affordability Challenges Persist

The U.S. housing industry is undergoing a major transition as of late August 2025. After several years of rapid price increases and constrained inventory, market conditions are gradually shifting to become more favorable for buyers. In March, 24 percent of Zillow listings saw price cuts during what is typically the spring buying season. Analysts note that while the market has not fully shifted to buyers, key metrics are moving in that direction. The U.S. currently holds a 4.4-month housing supply, still below the six months typical of a true buyer’s market, but the most balanced conditions in nearly a decade.

Builder confidence remains low, with the NAHB Housing Market Index falling again in August to 32, marking 16 straight months of negative sentiment. Persistently high mortgage rates, now averaging 6.5 to 6.7 percent, and high construction costs have left many builders discounting homes by an average of 5 percent. Two-thirds are offering sales incentives, a level not seen since the early pandemic period. This reveals deep affordability challenges, as the median list price in July reached $439,450, up 0.5 percent year over year and nearly 38 percent higher than in 2019.

New home construction remains depressed. Housing starts are down 23.9 percent from a year ago, and new home sales are off by 23.7 percent. Existing home sales have dropped 16.1 percent. The latest data shows modest home price appreciation, with Zillow forecasting a minimal 0.4 percent increase nationally through July 2026. However, signs of pressure are mounting. New tenant rents have dropped 14.2 percent in the past two quarters, and major indices project that home prices could soon see declines.

Some cities such as Cleveland and Phoenix have shown rare improvements in buyer power, mainly due to local wage growth. In response to these challenges, industry leaders are pressing the Federal Reserve for rate cuts, shifting to incentives and price reductions, and focusing on markets where robust homebuilding is possible. The overall outlook is for slow normalization, with more inventory, moderate price changes, and affordability gradually improving as the market inches toward balance. Compared to six months ago, the slowdown is intensifying, but sellers have only just begun to adapt to the new reality.

For great deals today, check out https://amzn.to/44ci4hQ

Episode Transcript

Speaker 1 (00:00):
The US housing industry is undergoing a major transition. As
of late August twenty twenty five, After several years of
rapid price increases in constrained inventory, market conditions are gradually
shifting to become more favorable for buyers. In March twenty
four per cent of zillolistings saw price cuts during what
is typically the spring buying season. Analysts note that while

(00:21):
the market has not fully shifted to buyers, hemetrics are
moving in that direction. The US currently holds a four
point four month housing supply, still below the six months
typical of a true buyer's market, but the most balanced
conditions in nearly a decade. Builder confidence remains low, with
the NAHB Housing Market Index falling again in August to

(00:43):
thirty two, marking sixteen straight months of negative sentiment. Persistent
high mortgage rates now averaging six point five to six
point seven per cent, and high construction costs have left
many builders discounting homes by an average of five percent.
Thirds are offering sales incentives, a level not seen since

(01:03):
the early pandemic period. This reveals deep affordability challenges, as
the median list price in July reached four hundred and
thirty nine thousand, four hundred and fifty dollars, up zero
point five percent year over year and nearly thirty eight
percent higher than in twenty nineteen. New home construction remains depressed.

(01:24):
Housing starts are down twenty three point nine percent from
a year ago, and new home sales are off by
twenty three point seven percent. Existing home sales have dropped
sixteen point one percent. The latest data shows modest home
price appreciation, with Zillo forecasting a minimal zero point four

(01:44):
percent increase nationally through July twenty twenty six. However, signs
of pressure are mounting. New tenant rentals have dropped fourteen
point two percent in the past two quarters, and major
indices project at home prices could soon seed declines. Some cities,
such as Cleveland and Phoenix have shown rare improvements in

(02:06):
buyer power, mainly due to local wage growth. In response
to these challenges, industry leaders are pressing the Federal Reserve
for rate cuts, shifting to incentives and price reductions, and
focusing on markets where robust home building is possible. The
overall outlook is for slow normalization with more inventory, moderate

(02:26):
price changes, and affordability gradually improving as the market inches
toward balance compared to six months ago. The slow down
is intensifying, but sellers have only just begun to adapt
to the new reality.