Researchers are finding that the balance of new homes and multifamily rental projects are closer to their historical averages in 2025, which should help stabilize both housing availability and housing prices—but there are also unknowns that could mean that housing will be just as out of reach for many as it’s been for the past several years.

According to a report from JPMorgan.com, new homes for sale are at 481,000, the highest level since 2007, and speculative homes for sale are at 385,000, the highest since 2008, approximately 50% and 40% respectively above long-term averages. Single-family homes for sale are 20% higher, year-over-year, but that’s still near record lows.

There are a number of reasons why housing is still far short of demand. While new single-family home building is normalizing, interest rates remain high and rents have declined causing builders to back off of building multi-family apartments. Higher rates are also keeping potential home sellers locked into their homes as they don’t want to give up their current mortgage loans to buy more expensive housing at higher interest rates.

Banks borrow money from the Federal Reserve. One of the Fed’s jobs is to fight inflation, so to slow down borrowing, the Fed raises its overnight borrowing rates to banks. To continue making profits, banks, in turn, raise their interest rates on loans and credit cards. In fighting a surge of inflation that began in 2022, the Fed has indirectly made mortgage loans more expensive.

At the time of this writing, the average 30-year fixed-rate mortgage was 6.65%, down from 6.79% a year ago, per Freddie Mac. But keep in mind these rates are the averages formed by homebuyers who made down-payments of 20% or more on the home they purchased, plus they met the qualifying credit requirements for a conventional loan. A conventional loan, by definition, meets the standards set by Freddie Mac and Fannie Mae.

Established in 1970 as a government-sponsored entity (GSE), the mission of Freddie Mac and Fannie Mae are to make buying a home easier for families by providing liquidity to mortgage lenders. When a bank makes a conventional mortgage loan to a homebuyer, the bank must use the GSE’s qualifying credit requirements in order to sell the loan to the GSE. Eligible loans are then purchased by the GSE and packaged into mortgage-backed securities. The money the bank loaned is replenished, allowing the next borrower to receive a conventional mortgage loan.

The GSEs can change their credit standards depending on how well their securities are doing. If the securities have too many loans that default, they lose money, and the GSEs will require higher credit scores, longer work histories, and larger down payments from borrowers. Since Freddie Mac began tracking rates in April 1971, the median 30-year fixed-rate mortgage rate is 7.33%, with the highest rate at 16.64% in 1981 and the lowest in 2021 at 2.96%. Even though the current mortgage rates are below the long-term median, that’s not enough to make homes more affordable when there’s low inventory and high home prices.

Realtor.com reports that active home listings for sale are up 29.2% year-over-year as of March 22, 2025, continuing a 72-week gain. If supplies keep improving at this pace, by the third quarter this year, homebuyers will have more choice and bargaining power in some locations.

Despite a steady increase in listings and rising mortgage rates, national existing home prices have proven relatively resilient. For the 43rd consecutive week, prices have either remained flat or declined only modestly. The average price per square foot rose 1.3% year-over-year, underscoring that values are holding—at least on paper. However, price reductions are up 17% from a year ago, signaling that many sellers are starting to face the reality that homes remain out of reach for many buyers. These reductions often precede more realistic listing prices as sellers try to avoid extended time on market. In fact, days on market has lengthened by three days compared to last year.

Most telling of all, pending home sales—homes that have gone under contract but not yet closed—are up 2% in February month-over-month, but down 3.6% year-over-year. Realtor.com notes that 2024 “went on to be the weakest year for home sales since 1995.” Help from homebuilders could be limited if housing permits, housing starts, and completions remain lower year-over-year, as they were in February 2025.

Consumer confidence in the economy has tanked, due to a volatile stock market, federal workforce upheavals and fear of tariff reprisals and other uncertainties. For the first time in two years, consumer spending is down slightly and economists are suggesting that Q1 2025 will register the first slowdown in the gross domestic product since the height of inflation in 2022.

The National Association of REALTORS® forecasts that rates will average 6.4% in 2025 and 6.1% in 2026. Existing home sales will rise by 6% in 2025 to 11% in 2026. National median home prices will increase 3% in 2025 and 6.1% in 2026.

While the spring/summer homebuying season should still be robust, it’s likely that sales volume will be lower due to irrepressible home prices and mortgage interest rates. If consumers continue to hunker down through the first half of the year, interest rates could fall slightly. As home sellers invariably adjust to market realities and lower their prices, it could be that Q3, 2025, will turn out to be the best time to buy a home this year.

Curious what this means for your real estate plans? Your Forever Agent® at Berkshire Hathaway HomeServices Colorado Real Estate is here to help you navigate market conditions and explore your best options. Call us at 303-905-8850 or visit BHHScoloradorealestate.com to get started with expert guidance.