The U.S. housing market is tightening, but not in the way sellers hoped.
With mortgage rates hovering near 6.3%, affordability remains stretched, and the demand is thinning. A growing imbalance between sellers and buyers is pushing the market decisively into buyer-friendly territory, and the cycle is showing late-stage strain.
Home prices surged during and after the pandemic as ultra-low rates, remote work, and migration fueled demand. The data from the U.S. Department of Housing and Urban Development shows a median domestic price of $410,000 in Q2 2025. It is up roughly 27% from 2019.
The data show price growth slowing sharply since 2023, yet elevated borrowing costs have kept monthly payments painfully high. The trend sidelined many first-time buyers even as more listings come online.
Sellers Takeover
The imbalance is now significant. According to Redfin, in December, there were 47% more home sellers than buyers nationwide. It was the widest gap since records began in 2013. By definition, it makes it a buyer's market. Buyers have more options and a greater ability to negotiate on price, repairs, and concessions.
The largest gap is in the Sun Belt — especially the markets that had the highest supply growth during the Pandemic era. Austin leads the list, with roughly 128% more sellers than buyers, followed closely by Fort Lauderdale (about 125%) and Nashville (around 111%).
By contrast, parts of the Northeast and Midwest, which had limited construction for years, remain closer to balanced or even seller-friendly.
Yield Holds The Line
The 30-year fixed mortgage rate tends to track the 10-year Treasury yield, plus a spread that reflects credit risk and market conditions. Recently, 10-year has struggled to get below 4%, rather hovering above the long-term average of 4.25%.
Meanwhile, turmoil in Japan’s bond market — the largest individual holder of U.S. debt — could spill over. The world's fourth-largest economy is facing a bond crisis in a year when the U.S. must refinance at least $8 trillion in debt.
Although economists expect some relief, they don't see a return to the easy-money era. Realtor.com chief economist Danielle Hale is somewhat optimistic, but expects mortgage rates to hover near 6.3% in 2026.
"A lot of the challenges that the housing market has been grappling with—the lack of affordability and the lock-in effect—are still going to be present in 2026, but the grip is kind of loosening," she told Axios.
18-Year Cycle Coming Around
Long-term cycle observers, such as veteran analyst Alan Longbon, argue that 2026 may mark a peak in the 18-year cycle. Longbon's framework ties property booms to credit expansion, demographics, and speculative excess—often culminating in moments of symbolic overreach.
"Investors should ride the fiscal wave but be ready to pivot as the real estate cycle turns," he noted in a recent analysis.
Longbon points to slowing population growth, worsening affordability, and the peak of the working-age population as structural drags on housing demand.
Historically, major cycle peaks have coincided with marquee construction projects. Burj Khalifa, the current tallest building in the world, broke ground in 2004 and completed the exterior in 2009. Currently, the world's next tallest building under construction, Saudi Arabia's Jeddah Tower, is scheduled to open in 2028.
Price Watch: Vanguard Real Estate Index Fund ETF (NYSE:VNQ) is up 2.19% year-to-date.
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