Prices soared — why housing in the US broke records again

In May, the US housing market stunned analysts again: despite high mortgage rates, sales increased by 0.8% year-on-year, reaching 4.03 million units. This is slightly higher than what experts predicted; they expected a decline. Rather than responding to limited demand, prices rose to a record high of $422,800.

At first glance, such dynamics may seem illogical. But the main reason is the lack of supply and the adaptation of buyers to the new reality, CNBC writes.

"The relatively subdued sales are largely due to persistently high mortgage rates. Lower interest rates will attract more buyers and sellers to the housing market," said Lawrence Yun, NAR’s chief economist at the National Association of Realtors (NAR).

Market geography: where demand grew and where it cooled down

The most significant growth was recorded in the northeastern United States (+4.2%), as well as in the midwestern and southern United States. In contrast, the West experienced a decline, with fewer transactions and prices falling by 5.4%. This is an exception to the general upward trend.

Analysts explain that these are deals concluded in March and April when mortgage rates were slightly lower. By April, rates had already exceeded 7%, and this increase may have a delayed effect on future data.

Market segments: who is buying and what exactly

Demand is concentrated in the mid-price segment — from USD 750 thousand to USD 1 million. In the luxury class (over $1 million), there is a decline in activity.

"The upper end market is showing no difference compared to other price points. For the past 20 months we have seen the upper end outperforming, but that is no longer the case," Yun said, suggesting it could be the residual effect of the stock market volatility when tariffs were first announced in April.

At the same time, 28% of houses were sold for more than the asking price, which indicates intense competition among buyers. The market is dominated by the psychology of urgency — those who are already accustomed to high rates want to "buy in time" before the next jump.

Cash and newcomers to the market

Fewer and fewer buyers are entering the market for the first time — the share of newcomers fell to 30%. Instead, 27% of transactions were made for cash, which is several points higher than last year. This indicates the growing role of investors who are not dependent on banks.

"The market is increasingly focused on those with savings or capital. It's hard for younger buyers to compete," Yun stressed.

The time to sell has also increased — on average, a house is sold in 27 days, while a year ago it was 24 days. This may indicate a certain slowdown in the market, although not critical.

Supply has increased, but the deficit has not disappeared

By the end of May, 1.54 million properties were on the market, a 20% increase from last year. However, this significant increase did not make up for the shortage in previous years.

The market still favors sellers, with supply below demand.

What's next: expectations for the second half of the year

Analysts and realtors expect the market to improve if mortgage rates decline. The Fed may gradually ease its monetary policy in the second half of 2025, opening up new opportunities for buyers.

"Buyers are now in a wait-and-see attitude. If rates go down, we will see a new wave of activity," Yun predicts.

However, we shouldn't expect a price drop yet, as the shortage of supply and a strong economy are working to support real estate values.

As we mentioned, the US rental market is characterized by significant regional differences. Coastal cities, especially in the Northeast and West, are traditionally more expensive due to their high population density and economic opportunities. In contrast, the interior of the country offers much more affordable rental options.

As reported, the UK remains one of the most attractive real estate markets in Europe. It boasts rising prices, investor activity, a relatively predictable legal system, and mortgage programs available to foreigners.