US Housing Market Update: Housing Market Is In A Deep Freeze As Home Sales Hit 25-Year Low
The American housing market is no stranger to boom and bust cycles. However, this US housing market update is about the later.
The current slowdown in existing home sales is remarkable in two ways. First, in its scale and second, in its stubbornness. US home sales in 2025 on track to reach their lowest levels in more than 25 years.
Analyst Meredith Whitney highlighted the stark reality of the real estate market. She states that housing has often been treated as a secondary in coverage of the economy. Yet the depth of this freeze and the reasons behind it are central to understanding broader economic conditions.
Past downturns happen when collapsing demand or financial crises abruptly cut off activity. Yet, today’s deep freeze is rooted in a peculiar mix of policy choices, pandemic aftereffects, and household-level psychology. The forces of supply and demand still operate. However, they are being distorted in ways that have left buyers sidelined and sellers locked in place.
The most obvious factor is mortgage rates. Millions of households refinanced or bought homes in 2020 and 2021, when rates fell below 3%. Those “golden handcuffs” make moving far less attractive. For example, a family secured a $400,000 mortgage at 2.8% in 2020. However, if they refi or buy another property, they now faces a payment increase of hundreds of dollars. Unsurprisingly, many simply refuse to sell, contributing to the freeze.
Whitney also points to an overlooked trend. Older Americans increasingly tapping home equity loans. Retirees are extracting liquidity while leaving housing supply tight. That subtle shift removes inventory from an already constrained market.
This creates a self-reinforcing freeze on transactions. As a result, this creates a housing market neither collapsing nor thriving, but immobilized.
Past housing cycles showed a drop in demand eventually led to falling prices. Today, limited supply has prevented prices from correcting meaningfully. Even with sales activity at quarter-century lows, the median home price remains near record highs. That keeps affordability stretched, and thus the freeze remains intact.
The consequences extend far beyond real estate. Housing is one of the economy’s most powerful engines, driving construction employment, consumer spending on furnishings, and local tax revenues.
When transactions dry up, a wide swath of related activity contracts. Realtors, appraisers, moving companies, landscapers, and retailers from Home Depot to Wayfair feel the pinch. The freeze also complicates Federal Reserve policy. Rate hikes are designed to slow demand, but the lock-in effect has amplified their impact.
Instead of facilitating a natural adjustment, higher rates have created paralysis.
The freeze also reshapes household decisions in ways that are somewhere between difficult and impossible to measure directly.
Younger families delay buying, renting far longer than intended. Older homeowners, instead of downsizing, remain in houses ill-suited to their stage of life.
Geographic mobility also suffers because it reduces the efficiency of labor markets. The decision to move across town, state, or across the country, once fairly common, has become an economic gamble. Meanwhile, creative financial behavior is emerging. Home equity loans and cash-out refinancing let older homeowners tap into their otherwise sequestered wealth, introducing risks in the process. Of course, all of this raises indebtedness among retirees. This causes a whole new economic crisis.
