A few months ago, Redfin proclaimed that a buyer’s market had finally arrived.
It was the first time home sellers didn’t have the upper hand this decade, ostensibly since 2019.
That take was based on growing for-sale inventory, which hit a six-year high back in January.
There were 3.7 months of for-sale supply on the market to begin 2025, the most since February 2019 and a decent year-over-year rise from 3.3 months in early 2024.
Now the real estate brokerage is predicting that home prices will go negative by the fourth quarter as mortgage rates remain elevated.
Home Prices Expected to Slip 1% By Year End
Redfin economists said they now expect the median home price to fall from +3% year-over-year to -1% by the fourth quarter.
It’s not a massive decline, but it’s not a rosy outlook either given the strong home price appreciation seen since values bottomed around 2012.
In fact, other than a brief downturn in 2023, home prices have risen year-over-year since 2012 due to a lack of for-sale inventory.
That created one of the longest seller’s markets in recent history, despite mortgage rates that nearly tripled from their all-time lows in less than two years.
As for why home prices are expected to dip, it’s simple supply and demand. Basically, more homes for sales and fewer able or willing buyers.
Redfin noted that demand has fallen and sales of existing homes slipped 1.1% year-over-year in April to a six-month low.
Meanwhile, it’s taking longer for homes to sell, with the typical home taking 40 days to close, up from 35 days a year ago.
The result is rising inventory, which increased 16.7% year-over-year to its highest level in five years.
At the same time, new listings are up 8.6%. So homes are taking longer to sell, listings are piling up, and even more homes are coming to market at the same time.
That all equates to rising supply, lower list prices, and eventual price reductions when homes don’t move as expected.
The good news, if you’re a prospective home buyer, is that this gives you more room to negotiate on price and/or ask for seller concessions.
You might even be able to get the seller to pay for a mortgage rate buydown to boost affordability.
Redfin Thinks Mortgage Rates Are Stuck for the Remainder of 2025
Speaking of mortgage rates, Redfin thinks mortgage rates will do absolutely nothing for the rest of the year.
Despite all the daily ebbs and flows, they are predicting a 30-year fixed at 6.8% for every single quarter of 2025.
Not exactly going out on a limb here, but it’s hard to blame them given all the uncertainty regarding policy.
Redfin’s head of economics research Chen Zhao blamed the “stubbornly high” mortgage rates on two main issues: tariffs and government spending.
In short, the tariffs, which seem to change by the day, have the ability to increase prices and inflation, which is no friend to mortgage rates.
And the rising government deficit, increasing even more due to the big, beautiful bill, leading to a ratings downgrade, can also put pressure on bond prices.
If the government has to issue more debt to pay for the bill, bond yields might go up or at least remain elevated for the foreseeable future.
Of course, Redfin might be downplaying the odds of a recession, in which case mortgage rates could actually fall.
My 2025 mortgage rate prediction called for a 30-year fixed in the high 5s by the fourth quarter.
For now, I’m sticking with it because I still believe 2025 will be a tale of two halves.
The first half, marred by tariffs, trade wars, tax cuts, uncertainty and stuck mortgage rates.
The second half, where we start to see economic fallout and a flight to safety in bonds, which leads to lower mortgage rates.
Of course, it might not provide much comfort to home buyers if they’re worried about job security and the future, thereby putting any buying plans on hold.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.