The U.S. housing market is showing its clearest signs yet of cooling after several years of relentless price growth. According to the National Association of Realtors (NAR), home prices are beginning to decline in nearly half the country, a shift that could provide long-awaited relief for buyers.
The most notable price declines are occurring in the Western United States, where the median sale price fell by 1.4% in July to $620,700. The South also saw a slight dip, with prices down 0.6% year over year. Nationally, however, prices did not follow this downward trend as strongly. The median existing-home price across the country inched up just 0.2% compared to July 2024, landing at $421,400. While still technically an increase, this figure underscores the slowest pace of home price growth since mid-2023.
This cooling represents a clear departure from the seller-dominated market that characterized the past several years. Between 2020 and 2023, housing supply remained tight while demand surged, leading to rapid appreciation and competitive bidding wars. Many buyers were priced out during that period, particularly first-time buyers struggling to compete with cash offers or investors. Now, with prices flattening and some regions experiencing outright declines, the leverage in negotiations is beginning to swing back toward buyers.
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Despite these shifts, challenges remain. Mortgage rates, while down from their recent peaks, are still elevated by historical standards. The average 30-year fixed mortgage rate hovered around 6.6% in July, its lowest point since late 2024 but still considerably higher than the sub-4% rates that fueled the pandemic housing boom. These borrowing costs continue to limit affordability for many families, even as prices cool.
Inventory levels have also increased compared to recent years, which is giving buyers more choice and flexibility. NAR data shows that housing supply rose to 1.55 million units in July, representing a 4.6-month supply at the current sales pace. This is the highest level of inventory since May 2020, though still below what most economists consider a balanced market. For buyers, more listings translate into less urgency and greater negotiating power. For sellers, it means being more realistic with pricing and, in some cases, offering concessions to attract offers.
Another key development is the rise in price reductions. In July, more than a quarter of listings nationwide saw sellers lowering their asking prices, a sign that homes are no longer selling as quickly or as easily as they did during the peak frenzy. Properties are staying on the market longer, giving buyers time to shop around and compare options rather than rushing into contracts.
Analysts emphasize that while the cooling is evident, this does not necessarily foreshadow a sharp downturn in prices. Most economists expect the housing market to stabilize rather than collapse. Household incomes are rising, unemployment remains low, and demand for housing is still strong in many areas, particularly in regions where job growth and population shifts continue. Instead of dramatic price drops, experts suggest the U.S. is entering a period of slower, more sustainable growth.
For consumers, these changes carry important implications. Buyers may find more opportunities to negotiate, secure concessions, or simply gain the time to make decisions without the fear of being outbid immediately. Sellers, on the other hand, need to adjust strategies, focusing on proper pricing and presentation rather than assuming rapid appreciation will guarantee a quick sale.
This evolving market also holds particular promise for first-time buyers, who faced significant hurdles in recent years. The combination of slightly lower prices in some regions, stabilizing mortgage rates, and increased supply could open the door to homeownership for households who were previously shut out. While affordability remains a hurdle, the shift toward a more balanced market offers a measure of cautious optimism.
Looking ahead, much will depend on broader economic conditions, including Federal Reserve policy, wage growth, and inflation trends. If rates continue to ease slightly and supply continues to rise, the second half of 2025 could mark a more favorable environment for buyers than has been seen in years.
As of August 21, 2025, the U.S. housing market appears to be in transition. The days of rapid, double-digit price growth have given way to a more moderate environment where buyers hold more influence and sellers face greater competition. For many Americans, this moderation represents not only a reprieve from the frenzy of recent years but also a potential opening to finally achieve homeownership under less daunting conditions.
