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Despite early signs of a market cooldown, U.S. home prices continue to break records in 2025. In May, the median listing price climbed to $442,500, hitting a new high even as some buyers step back due to affordability constraints (MSN). Inventory shortages remain a key factor, limiting supply in many markets and propping up prices. Yet surprisingly, this hasn’t fully dampened demand.
Mortgage applications for home purchases surged 20% year-over-year this spring, suggesting a resurgence in buyer interest—especially in areas where inventory is slowly improving. According to the National Association of Realtors, even a modest drop in rates could further ignite activity. For now, however, buyers continue to navigate a landscape of high borrowing costs.
The Federal Reserve’s decision to hold interest rates steady this summer reflects both economic caution and political pressure. While savers benefit from elevated deposit rates, borrowers face persistent hurdles. Credit cards, auto loans, and mortgages remain expensive, and economists don’t expect a rate cut until at least September (CNBC). For many first-time buyers, this means continued difficulty qualifying for loans—even if home prices stabilize.
Millennials, now the largest group of homebuyers, are feeling this pressure acutely. They’re purchasing homes at higher rates than other generations, but their per-capita homeownership still lags. Despite being in their peak buying years, many face ongoing affordability issues, especially in urban areas where competition is stiff and wages haven’t kept pace with inflation (Apartment List).
Meanwhile, in the commercial sector, recovery has taken a more fragmented path. Office absorption and rent growth have picked up in cities like New York and Columbia, South Carolina, signaling localized rebounds. Multifamily housing demand has stayed strong overall, but rent growth has flattened due to an influx of new apartment units built during the pandemic-era construction boom (NAR).
In short, the real estate market is sending mixed signals. Prices are high, yet buyers are reemerging. Rates are steady, yet affordability remains a barrier. Millennials want to buy, but many still can’t. And while some cities are bouncing back, others lag behind. The rest of 2025 will likely hinge on interest rate movements, regional inventory shifts, and how buyers—especially younger ones—respond to evolving market conditions.
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