The traditional peak home buying and selling season is coming to an end after yet another disappointing showing.
For the fourth year in a row, high home prices and higher mortgage rates appeared to put many buyers on the back burner this spring, although slightly lower mortgage rates, strong wage growth and an increase in the number of homes for sale improved their purchasing power.
Home sales rose less than 1 percentage point this year over 2025 levels, a particularly small improvement given that sales last year hit a three-decade low, according to the National Association of Realtors.
Mortgage rates are probably to blame. A brief dip below 6% in late February was quickly reversed when the US attacked Iran and oil prices and inflation soared. For much of the spring, rates hovered around 6.5%, which, although lower than last year’s average of 6.7-6.8%, has discouraged both buyers and sellers.
“I think most of the market is just hungry for a 5% interest rate,” said Sean Zangane, a real estate agent in San Diego.
He had a busy start to the year when rates were lower, but noted that sales activity, especially in the mid-market, had slowed after they had risen. The average list price of a home in the San Diego metro area is nearly $1 million, meaning even a small increase in mortgage rates can have a significant impact on your monthly payments.
“An extra $500 (per month) for a $1 million buyer in San Diego — which is about our average price — is a pretty big difference in their cost of holding,” he said.
A “For Sale” sign next to a property for sale in Alhambra, California, on August 28, 2025. (FREDERICK J. BROWN/AFP via Getty Images) · FREDERICK J. BROWN via Getty Images
Signs of “resilience”
While persistently higher rates have prompted companies like Zillow ( ZG ) and Realtor.com to lower their expectations for home sales this year, housing market watchers say the numbers aren’t that bleak.
Sales remain in positive territory even as higher rates reduce housing affordability, “evidence of some resiliency in the housing market but also some pent-up demand,” said Odeta Kushi, deputy chief economist at First American Financial Corporation.
Many homebuyers who entered the market this year were able to take advantage of more favorable terms. For-sale inventory levels have risen across much of the country, giving buyers more options, and rising home prices have, on average, been accompanied by rising wages. In some parts of the country, especially cities in Florida, the Southeast and the Mountain West, prices have now fallen from peaks seen several years ago.
Ashley McPoland, 28, bought her first home earlier this year in Gilbert, Arizona, an area she chose for its up-and-coming atmosphere and affordable entry-level home prices. Having moved from California, she periodically flew in to look for new listings and found she had many options.
“The best thing about the current housing market is that I felt like I wasn’t being rushed,” said McPoland, who works as a mortgage broker. She said she’s seen some of her own clients back down this year as rates rise, noting, “There aren’t really a lot of buyers looking right now.”
She eventually settled on a three-bedroom, three-bathroom home that was still on the market. Her below-list price offer was accepted, and the sellers offered her a $15,000 credit to cover closing costs.
“This continues to be a challenging market for first-time homebuyers,” said Danielle Hale, chief economist at Realtor.com. “At the same time, we’ve seen some progress because while it’s still quite expensive, it’s not as expensive as it was a year ago.”
Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages and home insurance.
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