📊 Current State of the U.S. Real Estate Market

Residential Housing Sales & Price Trends

The U.S. residential real estate market in 2025 is characterized by a complex mix of stabilizing prices, low transaction volumes, and persistent affordability concerns. Existing-home sales have reached multi-decade lows, due primarily to the lingering effects of elevated mortgage rates, now averaging around 6.8% for a 30-year fixed loan. This has created a scenario where many homeowners are reluctant to sell, preferring to hold onto their properties and previously secured low-rate mortgages.

As a result, inventory levels in the existing-home segment remain tight, creating a supply-demand imbalance that keeps home prices surprisingly resilient. The national median home price has climbed modestly, reaching approximately $390,000 by mid-2025. Year-over-year growth is moderate, averaging between 3% and 4% nationally, though local variations are significant. Major metros such as New York, Chicago, and Cleveland have posted above-average price gains, while other once-booming cities like Tampa and Denver have seen flat or slightly negative price trends.

The new-home market, on the other hand, is showing increased activity. Builders are responding to the inventory gap by accelerating development, pushing new-home inventory to its highest levels since the mid-2000s. However, builder sentiment has cooled notably in recent months. Elevated construction costs, buyer hesitancy, and concerns about future demand have led to more cautious development. A significant number of builders have responded by offering price reductions and incentives, such as mortgage buydowns or upgraded features, in an attempt to attract prospective buyers.

Affordability continues to be a central concern, particularly for first-time homebuyers. The combination of high home prices and elevated interest rates has pushed the average age of first-time buyers to a historic high of 38. Many are delaying purchases or turning to multi-family rentals, adding pressure to the rental housing market.

Commercial Real Estate Performance

In the commercial real estate (CRE) sector, performance has become increasingly segmented by asset class. The office market remains under considerable stress. National vacancy rates have risen to nearly 14%, and in some premium downtown areas, Class A office space is experiencing vacancies exceeding 20%. This is largely due to the continuation of hybrid work models, corporate downsizing, and shifting space needs. Leasing activity remains muted, although there are emerging signs of stabilization as companies reassess their long-term workplace strategies.

The multifamily segment continues to demonstrate resilience, fueled by ongoing demand from households priced out of homeownership. Net absorption has increased significantly, and while rent growth has slowed from pandemic-era highs, it remains positive at around 2–3% annually. Vacancy rates have held steady at near 5%, a healthy level that supports continued investor interest in this segment.

Retail real estate, once considered a weak link in the commercial market, has surprisingly stabilized. Vacancy rates are near historic lows, particularly in well-located suburban centers and lifestyle malls. Rents have experienced modest growth, and lease terms are lengthening as tenants seek to lock in space in high-traffic areas. This reflects a broader shift in consumer behavior favoring physical retail experiences, particularly in the food, health, and entertainment sectors.

Industrial and logistics properties continue to perform strongly. Demand is driven by ongoing e-commerce growth, manufacturing onshoring, and strategic supply chain realignments. While vacancy rates in older industrial stock have risen slightly, newly built Class A properties near transportation hubs remain highly sought after. Rent growth is steady, particularly in key logistics corridors across the Midwest and along the U.S.–Mexico border.

One of the most dynamic segments in the CRE market is the data center sector. Spurred by the explosive demand for cloud computing and artificial intelligence infrastructure, data centers are experiencing near-record-low vacancies. Developers are racing to bring new capacity online, and pre-leasing activity is at historic highs, with many facilities fully leased before construction is completed.

Regional Performance

Regional differences in both residential and commercial markets are becoming increasingly pronounced. On the East Coast, cities such as New York, Boston, and Washington, D.C., are seeing stable or rising home values, particularly in suburban and secondary markets. These areas have benefited from demand for space and amenities, as well as better relative affordability compared to high-cost urban cores.

In contrast, some Sun Belt markets that experienced explosive growth during the pandemic—such as Phoenix, Austin, and Tampa—are beginning to cool. After years of rapid price appreciation, these cities are now facing price corrections, increased days on market, and slower sales activity. Nonetheless, their underlying fundamentals, including job growth and population inflows, remain strong, particularly in the rental market.

On the West Coast, affordability remains a major barrier. California continues to experience some of the highest median home prices in the nation, with areas like the Bay Area and Los Angeles well above $1 million. These price levels, coupled with rising insurance and tax burdens, have slowed buyer activity. Commercial real estate in tech-centric regions like Silicon Valley is also undergoing adjustment, as major firms downsize or reconfigure office footprints.

Meanwhile, the Midwest and smaller metropolitan areas across the country are seeing renewed interest. These markets offer more affordable housing, stable job markets, and improved quality of life, attracting both buyers and investors alike. Cities like Columbus, Indianapolis, and Des Moines are now considered emerging investment hubs, thanks to lower barriers to entry and relatively strong economic fundamentals.

Conclusion

The U.S. real estate market in 2025 is navigating a transitional period marked by shifting interest rates, evolving demand patterns, and regional divergence. While residential home sales remain constrained by affordability and high borrowing costs, prices have shown surprising resilience. Commercial real estate performance is increasingly bifurcated, with sectors like multifamily, industrial, and data centers thriving, while the office market continues to adapt to post-pandemic realities. Looking ahead, regional trends, demographic shifts, and the path of interest rates will play pivotal roles in shaping the trajectory of the market in the months to come.