What You Need to Know About Today’s Real Estate Market..

The U.S. real estate market in 2025 continues to navigate challenges and opportunities shaped by economic trends, interest rate fluctuations, and evolving buyer preferences. While the rapid price increases of 2020-2022 have slowed, home values remain high compared to pre-pandemic levels.

According to the National Association of Realtors (NAR), the median existing-home price as of late 2024 was $394,000, slightly down from the 2022 peak but still reflecting significant appreciation over the last decade.

Key Trends Nationwide:

Higher Mortgage Rates: Mortgage rates, which hovered near historic lows in 2021, have risen substantially due to Federal Reserve rate hikes. As of January 2025, the average 30-year fixed mortgage rate stands at approximately 6.9% (Freddie Mac).
Inventory Shortages: Housing inventory remains tight, with active listings down 15% year-over-year in December 2024 (Realtor.com). This shortage is driven by homeowners locked into low-interest mortgages and hesitant to sell.
Increased Demand for Affordable Housing: Buyers are shifting toward smaller homes, townhouses, and suburban areas to balance affordability with lifestyle needs.
Shift Toward Remote Work: The continued prevalence of hybrid and remote work models has made smaller markets and rural areas more desirable for many buyers seeking affordability and space.

Texas Real Estate Market

Texas has been one of the fastest-growing states in the country, with cities like Austin, Dallas, Houston, and San Antonio leading the charge. Despite higher interest rates, demand remains strong in the Lone Star State due to population growth, economic expansion, and relative affordability compared to coastal markets.

Key Trends in Texas:

Population Growth Driving Demand: Texas added over 470,000 residents between 2023 and 2024, according to the U.S. Census Bureau. This population boom fuels housing demand, particularly in suburban areas and secondary markets like Round Rock and Frisco.
Diverse Economy: Texas’ economy—bolstered by industries like energy, technology, and healthcare—attracts a steady influx of workers, which sustains housing demand.
Price Trends: While home price growth in Texas has cooled compared to the double-digit increases of previous years, prices are still trending upward. The Texas Real Estate Research Center at Texas A&M University reports that the median home price statewide in late 2024 was $345,000, a 4% year-over-year increase.
Challenges with Inventory: Like the national market, Texas faces inventory shortages. Many sellers are reluctant to move due to their low locked-in mortgage rates, contributing to competitive conditions for buyers.

Factors Impacting Real Estate this 2025

Federal Reserve Policy

The Federal Reserve’s efforts to curb inflation through interest rate hikes have significantly impacted the housing market. Higher borrowing costs have reduced purchasing poweror buyers, leading to a decline in sales volume. According to the Mortgage Bankers Association, mortgage applications were down 29% year-over-year as of December 2024.

Affordability Challenges

The combination of high home prices and elevated interest rates has worsened affordability. In 2024, the National Association of Home Builders/Wells Fargo Housing Opportunity Index found that only 40% of homes sold were affordable to a median-income family, down from 56% in 2020.

Builder Activity

New construction is playing a critical role in easing inventory constraints. Single-family housing starts increased by 9% year-over-year in 2024, according to the U.S. Census Bureau. In Texas, builders are focusing on entry-level homes to address demand from first-time buyers.

Tips for Buyers and Sellers in Today’s Market

For Buyers:

Get Pre-Approved: Higher mortgage rates mean it’s more important than ever to know your budget and secure pre-approval before house hunting.
Be Ready to Act: With inventory tight, desirable properties sell quickly. Working with an experienced agent can help you move fast when you find the right home.
Consider New Construction: Builders are offering incentives like rate buy-downs and closing cost assistance to attract buyers.

For Sellers:

Price Strategically: Overpricing can lead to extended days on the market. Collaborate with a local real estate expert to price your home competitively.
Highlight Energy Efficiency: Homes with energy-efficient features like solar panels or smart thermostats are increasingly attractive to cost-conscious buyers.
Be Flexible: Offering incentives like covering closing costs can make your property stand out in a more cautious market.

Resources for Staying Informed

National Association of Realtors: Regular updates on national market trends and data.
Texas Real Estate Research Center: In-depth research on the Texas housing market.
Freddie Mac: Weekly updates on mortgage rates and affordability.
U.S. Census Bureau: Population and housing data.
Realtor.com: Current listings and housing market insights.

The 2025 real estate market is complex, but opportunities abound for both buyers and sellers. Whether you’re navigating the competitive Texas market or considering a move elsewhere in the U.S., staying informed and working with trusted professionals is key. With the right strategy and support, you can successfully achieve your real estate goals in today’s evolving landscape.

Post written by Kimberly Mendoza from Living Local Texas