Home prices forecast to dip before the end of the year | FOX 51 Gainesville

Home prices forecast to dip before the end of the year

After years of steady home price increases, the US housing market is shifting into reverse. Redfin economists say prices are flattening and forecast a 1% year-over-year dip by the end of 2025—only the second time in over a decade prices have declined. The softening comes as more homes sit unsold, buyers pull out of deals, and affordability improves slightly with rising wages.

Mortgage rates hovering near 7% and persistent economic uncertainty are cooling demand, leading to higher inventory levels and price cuts—especially for homes that have lingered on the market. Redfin’s latest reports highlight a growing sense among buyers that patience may pay off, though experts caution that waiting too long won’t necessarily yield better deals.

Why are home prices expected to fall in 2025?

The backstory:

After a prolonged seller’s market, the pendulum is swinging. Redfin reports that home sales dropped 1.1% year over year in April, while inventory rose nearly 17%—the highest in five years. With fewer buyers competing and more listings available, sellers are being forced to lower prices or offer concessions.

Typical homes now take 40 days to sell—five days longer than a year ago. Buyers are gaining negotiating power, particularly on homes that have sat for weeks. Redfin agents suggest offering under asking price or requesting seller-paid concessions like rate buydowns or repair credits.

What they're saying:

Redfin Premier agent Corey Stambaugh said many sellers are still anchored to the record-high prices of 2021 and 2022, even though the market has changed. "Even though we advise them to list at today’s market value, a lot of them decide to list high to recoup their money," he said. "But those sellers face reality once their home has been sitting for a couple weeks without any offers."

Redfin’s head of economics research, Chen Zhao, added, "We know there’s room to negotiate right now, so that’s the best way to take advantage of the changing market."

By the numbers:

The study’s scale and results offer a clearer picture of where the housing market may be heading:

  • 1% year-over-year drop in median US home-sale price projected by Q4 2025
  • 14.3% of home-purchase agreements were canceled in April 2025 (56,000 total)
  • 16.7% increase in inventory year over year
  • 40 days: average time a home takes to sell, up from 35 days in 2024
  • 6.8%: expected average mortgage rate through end of 2025

Which cities are seeing the most canceled deals?

Local perspective:

Florida is home to five of the 10 metros with the highest cancellation rates, driven by rising natural disaster risk and surging insurance and HOA costs. Atlanta led with a 20% cancellation rate, followed by Orlando, Tampa, Riverside (CA), and Miami. Cities with the lowest cancellation rates include Nassau County, NY (4.8%) and Boston (8.1%).

FILE - A "For Sale" sign stands outside a home as rising inventory and elevated mortgage rates reshape the US housing market. Redfin forecasts a slight price dip by the end of 2025 amid growing buyer leverage. (Photo by Steve Pfost/Newsday RM via Getty Images)

Seattle and Anaheim saw the biggest year-over-year increases in cancellations, with Anaheim jumping 3.1 percentage points to 15.7%.

How are mortgage rates affecting the market?

Big picture view:

Redfin expects mortgage rates to hover near 6.8% for the rest of 2025. While President Trump recently cut some proposed tariffs on China, the ongoing trade uncertainty and rising US deficit are keeping the Fed from easing rates further. If tariffs are eliminated completely, or if a recession hits, rates could drop into the 5–5.5% range—but neither scenario is guaranteed.

Zhao warned that while lower rates might sound good, they could be offset by weakened buying power during a downturn. "Even though mortgage rates would be lower, many buyers would have less money to buy a home," she said.

What's next:

Buyers have a rare window of leverage, but it may not last. Experts suggest acting sooner rather than later to take advantage of negotiability, especially on homes sitting longer than average. Sellers are advised to list competitively from the start or risk facing price cuts and slow traffic.

The Source: This article is based on Redfin’s May 22, 2025 housing market forecast and home-purchase cancellation report, which include data on sales trends, buyer behavior, and pricing expectations through the end of the year. Additional context was drawn from public statements by Redfin agents and economists.

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