Berkshire Hathaway's U.S. Real Estate Market Forecast for Q4, 2025

There are some wild cards in the housing deck for the end of 2025, starting with U.S. and worldwide political, social, and economic unrest. Conflicts in the Middle East and Europe, immigration controversies, see-sawing trade negotiations, tariffs, and the perpetually high costs of housing (interest rates, construction costs, home prices) suggest that the housing market could lose a hand or two. Uncertainty breeds hesitation, but is pent-up demand stronger?

In June 2025, The Federal Reserve kept overnight borrowing rates to banks at 4.25%-4.50% for the fourth meeting in a row. The Fed also gave guidance that it’s lowering its gross domestic product growth projection and anticipating higher unemployment for 2025 and 2026. It will likely lower its rates twice by .25 points each time by the end of the year. Jubilant investors immediately drove The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite to all-time highs. As of this writing, the Fed will reconvene at the end of July, when it may or may not implement the first .25% cut.

Meanwhile, the National Association of Home Builders (NAHB) has reported that persistent interest rates and economic uncertainty led to a 13.7% decline in new home sales—measured by purchase contract signings—in May. As inventory rose to a 9.8-month supply, 37% of builders responded by cutting prices. That level of inventory means it would take 9.8 months to sell all available homes at the current pace, assuming no new supply is added. The median price of a new home in May was $426,600, up from $414,300 the year prior. The NAHB also noted that the number of new homes priced under $500,000 declined 15% year over year.

The National Association of REALTORS® (NAR) also reported a decline in year-over-year sales, from 4.06 million in May 2024 to 4.03 million in May 2025. Supplies of homes for sale have increased 20.3% to 1.54 million units on hand from May 2024 when there were 1.28 million available homes for sale. That’s a 4.6-month supply of unsold inventory, up from 4.4 months in May 2024. The median sales price for all housing types was $422,800, up 1.3% from the year before, marking the 23^rd consecutive month of year-over-year price increases.

Additionally, Realtor.com found that the pace of sales slowed in May to 51 days on the market—six days longer than the year before. Prices were reduced for 19.1% of listings.

Pending home sales increased by 1.1% year over year in May 2025, largely on a gain in jobs and wages, explained NAR’s Chief Economist Lawrence Yun. Realtor.com Chief Economist Danielle Hale noted that mortgage rates decreased between April and early May, which could also account for the modest rise in pending homes, but in mid-May, rates began increasing again. Just as home sales are counted when they close escrow, pending home sales represent contract signings that have yet to close. While some of these deals fall through, the exact fallout rate isn’t consistently reported, making it difficult to know how many pending sales ultimately close.

The NAHB estimates that the combined supply of new and existing homes is at 5.2 months on hand—the highest level since 2015. A balanced market with conditions favorable to both buyers and sellers is widely believed to be five to seven months’ supply of homes on hand.

Lack of supply was among the reasons why housing is so expensive, so with more homes for sale, will housing prices come down? There’s a good chance they will, but not uniformly across the U.S. According to Realtor.com, only 22 out of the 50 largest metro areas have recovered inventory to pre-pandemic levels between 2017 and 2019, and all 22 are either in the South or West. The highest supplies are Denver, which is 100% over its pre-pandemic inventory levels, Austin at 69%, and Seattle at 60.9%. The three metros with the least inventory compared to pre-pandemic levels are Hartford at -77.7%, Chicago at -59.3% and Virginia Beach at -56.7%. While it’s the 14^th month of rising inventories nationwide, areas like the South that experienced the most influx of new homes since 2019 are also the ones showing price decreases and listing price reductions. Areas like the West and Northeast have had little new home construction, so prices are holding more firmly in those regions.

As for the forecast for Q4 2025, most housing experts agree that meaningful relief may not arrive until 2026 or later, as mortgage interest rates are unlikely to decline significantly.

The National Association of Home Builders (NAHB) expects that the benchmark 30-year fixed-rate mortgage—for borrowers with excellent credit and financials—will remain in the mid-6% range through the end of 2025. They don't expect rates to dip below 6% until late 2026.

The National Association of REALTORS® (NAR) projects that mortgage rates will average 6.4% in 2025, falling slightly to 6.1% in 2026. However, they caution that homebuyers shouldn’t expect a return to 4% or even 5% rates anytime soon, citing the drag of the nation’s massive debt load.

The Mortgage Bankers Association (MBA) forecasts average rates of 6.7% in Q3 2025, easing only slightly to 6.6% by year’s end and 6.5% in Q1 2026. Similarly, J.P. Morgan anticipates that rates will stay above 6.5% throughout 2025, while Wells Fargo expects rates to hover around 6.5% by year-end.

Fannie Mae is the most optimistic among major forecasters, projecting a rate of 6.1% by the end of 2025 and 5.8% in 2026.

While these forecasts suggest a softening housing market, most economists believe that home prices are unlikely to fall dramatically. Instead, they expect prices to continue rising—just at a slower pace. Slightly lower rates might encourage buyers to act, especially if more sellers list homes to beat any potential price correction. That could increase inventory and put downward pressure on prices.

Still, a major issue remains: the lack of affordable homes, especially for first-time and lower-income buyers. According to NAR, in Q1 2025 only 1 in 5 listings were affordable to households earning $75,000—compared to half of all listings before the pandemic. To restore affordability, the U.S. would need to add over 400,000 listings priced at $255,000 or below—and even that may fall short of what’s needed.

Article originally published here: U.S. Real Estate Market Forecast for Q4, 2025