Existing home sales in the U.S. reached a 31-year low in 2025, with year-over-year declines fueled by persistently high mortgage rates and unaffordable home prices. Analysts point to a potential rebound if interest rates stabilize and inventory levels improve.
- Existing home sales dropped to 3.9 million units in 2025, the lowest since 1994.
- Average mortgage rates averaged 7.8% in 2025, up from 3.5% in 2021.
- Median home price reached $432,000, with inventory down 12% year-over-year.
- Homeownership rate fell to 62.4%, the lowest since 2010.
- Projected new home construction in 2026 is 1.4 million units.
- Equity retention by homeowners is a key barrier to market turnover.
Existing home sales in the United States fell to a 31-year low in 2025, marking the weakest annual performance since 1994. Data shows sales volumes declined by 18% compared to the prior year, with total transactions falling to 3.9 million units—a level not seen since the early 1990s. This contraction followed a sustained period of elevated mortgage rates, which averaged 7.8% for the year, significantly above the 3.5% average seen in 2021. The downturn was driven by a dual challenge: limited inventory and affordability constraints. Only 1.2 million homes were listed for sale during 2025, a 12% decrease from 2024, with the median home price rising to $432,000. This combination made it difficult for first-time buyers to enter the market, while existing homeowners hesitated to sell due to the significant equity they hold at lower rates. As a result, the homeownership rate dropped to 62.4%, its lowest level since 2010. A rebound is possible if mortgage rates stabilize below 7.0% and the Federal Reserve signals a pause in rate hikes. Analysts also note that easing inflation and improved labor market conditions could boost consumer confidence and purchasing power. Additionally, a modest increase in new home construction—projected at 1.4 million units in 2026—could alleviate supply shortages. The housing sector’s recovery would have broad economic implications, including positive spillovers to related industries such as home improvement, furniture, and construction. Financial markets are closely monitoring housing data, as it remains a key indicator of consumer health. Stocks in homebuilding and mortgage finance sectors have shown early signs of recovery in early 2026, with builders like Lennar (LEN) and D.R. Horton (DHI) posting gains in January.