Current Real Estate Market Trends to Watch

Rising Home Prices Amidst Low Inventory

Home prices have continued to rise in many parts of the country. According to recent data, in February 2025, U.S. home prices increased by 3.0% compared to the previous year, bringing the median home price to $424,647. While this growth is moderate, it still reflects a strong demand for housing.

However, the market is experiencing a unique trend—the number of homes sold has dropped by 5.5%, while the number of homes available for sale has increased by 11.8%. This suggests that although more homes are entering the market, buyers are becoming more cautious. Several factors are contributing to this, including higher mortgage rates and affordability concerns, which are preventing some buyers from making purchases.

For sellers, this means pricing competitively is crucial. Overpriced homes may sit on the market longer, while well-priced properties in desirable locations are still selling quickly.

Regional Variations in Market Activity

While national trends provide an overall picture, real estate activity varies significantly by region. Some areas are experiencing rapid price increases, while others have more stable growth.

One standout example is Milwaukee, Wisconsin, where median home prices have increased by 20% year-over-year as of February 2025. This sharp rise is largely due to an influx of new residents drawn to Milwaukee’s affordability and quality of life. However, this surge has also led to a housing shortage, making it harder for local buyers to compete.

This pattern is being seen in other affordable mid-sized cities, where demand is increasing due to factors like remote work flexibility and a desire for more space. Buyers in competitive markets should be prepared for bidding wars and consider expanding their search to surrounding areas.

On the other hand, larger metropolitan areas like New York and San Francisco are experiencing a more balanced market, with price growth stabilizing and inventory increasing.

Impact of Mortgage Rates on Buyer Behavior

Mortgage rates play a critical role in the housing market, influencing both buyer affordability and seller pricing strategies. Over the past year, higher interest rates have slowed down the pace of home purchases. Many buyers are holding off on purchasing until rates decline, while some are adjusting their budgets to accommodate higher monthly payments.

As a result, the market is seeing fewer speculative buyers, and transactions are being driven primarily by major life events such as:
Job relocations
Marriage or growing families
Downsizing due to retirement

If mortgage rates fall in the coming months, we could see a surge in demand from buyers who were previously on the sidelines. For now, buyers should focus on locking in the best possible rate, while sellers should be aware that higher borrowing costs may limit the pool of potential buyers.

Challenges in Housing Affordability

Affordability remains one of the biggest concerns for homebuyers, especially in high-demand areas. Over the past few years, home prices have risen significantly faster than wages, making it harder for first-time buyers to enter the market.

A clear example of this is in Ireland, where house prices have surged by 35% since the COVID-19 pandemic, with Dublin experiencing weekly price increases of €1,000. This trend highlights the global nature of housing affordability challenges.

To combat this, some buyers are considering alternative options such as:
Moving to less expensive areas
Buying smaller homes or fixer-uppers
Exploring creative financing options like shared equity programs

For sellers, understanding affordability issues means that pricing competitively and offering buyer incentives, such as covering part of the closing costs, could help attract more offers.

Conclusion

The real estate market continues to shift, with rising home prices, regional differences, mortgage rate impacts, affordability challenges, and growing investor interest in alternative properties all playing key roles.