Home prices have been rising for years. why? There aren’t enough homes.
It’s not stretch to say these are unprecedented times for becoming homeowners. Housing is expensive, mortgage rates are rising, and the economy is unstable. Home prices have skyrocketed 30% over the past five years, reaching a record high of $443,000 in 2024.
That’s just the beginning. Since closing, homeowners have faced sudden monthly expenses, including mortgage payments, insurance, taxes, and more, which have hovered near highs for months, thanks to a combination of rising home prices and high mortgage fees.
These trends create a more expensive housing market with typical homes selling for nearly 50 days (compared to 40 days in 2024) that is slower than most Americans sell even starter homes. Instead, more people are being pushed into rentals. This is more affordable than buying in all major cities.
So, how did this happen? Why is a house so expensive? This Redfin article analyzes the biggest reasons for today’s high prices and explains how buyers and sellers can navigate the market.
>> Looking for something you can afford? Check out the most affordable cities in the US in 2025
1. Years of buildings have created a serious housing shortage
The house is very expensive. Because it’s simply not enough for them. Too many buyers are competing with too few real estate, creating imbalances in supply and demand. This is not a new trend either. The US has built homes since the Great Recession in 2008 due to home prices and mass foreclosures, and has not recovered. The starter’s house was particularly violently attacked.
The pandemic home-being frenzy has exacerbated the problem by ejecting already low stocks and pushing them to record levels. This imbalance has thankfully helped ease price growth recently. Buyers are being hampered by record high costs, and listings are rising as sellers need to adapt to mortgage interest rates, or cash at a higher price, or simply move.
2. Zoning Act limits new construction
In many regions, World War I detached house zoning laws limit the ability to build sufficient housing units. For example, in California, which has one of the biggest housing shortages, 96% of the available land is zoned exclusively for single-family homes. These constraints reduce overall housing supply and contribute to a rise in home prices.
President Trump has taken multiple stances on zoning laws, including calling for change and pledging to strengthen the ideals of detached suburban homes. Other ways to increase housing supply have not yet been in shape, like his promise to remove regulations based on federal land.
3. Investors are increasing the proportion of homes
Residential investors – institutions or businesses that buy residential real estate – are increasing their overall market share. The more homes owned by investors, the fewer people available to everyday buyers. This was actually one of the few agreements during the 2024 presidential election.
This trend has become most obvious during the pandemic. Just as everyone else was in a hurry to buy a home, investors bought a record $64 billion worth (nearly 100,000 real estate). This has brought the total market share to 21%. That is, five homes were purchased by investors. Their share then declined due to a surge in size, but still affects the overall prominent housing inventory.
Will home prices fall this year?
They may be, but the more likely scenario is that prices rise more slowly. While record-breaking affordability has eased demand, some cities like San Antonio and Oakland are seeing declines. However, nationwide, prices have risen slightly due to tight stocks. Prices can fall meaningfully as buyers demand continues to decline and sellers continue to list.
At the same time, the unstable economy continues to weigh in the market. Tariffs could boost construction costs, and migrant crackdowns could reduce the construction workforce, and trade wars could lead to inflation, recession, or both. As a result, everyone is cautious and the market is stuck. Therefore, it is more important than ever to prepare before entering the housing market.
How to buy and sell in the expensive housing market
Home prices are high and few homes are for sale, but supply is stacked, giving buyers an edge. However, trends vary by region. In the Midwest region, there are more buyers than sellers, which means homes sell quickly and boost prices. In parts of the South, prices are falling as sellers outperform buyers. Talk to local real estate agents to learn how your area operates.
Below are some tips for navigating today’s slow and expensive housing market.
For buyers:
Be patient: Stock is on the rise, but in some areas there is still high competition for affordable homes. Once you find the right home, you’ll get pre-approved and move quickly. Negotiate aggressively: More inventory gives buyers more room to negotiate prices, repairs, or closure costs.
Be careful with your budget: Mortgage fees remain high so know your limits. Don’t grow just because stock is up. Instead, focus on long-term affordability. Consider concessions: More sellers are offering concessions for closing transactions, such as buying fees, paying agent fees, and covering closing costs. Don’t be afraid to ask. Shop for a mortgage: The prices are higher, but these days vary widely from lenders to lenders. Compare lenders and consider the floatdown option if the rate drops after locking one.
>>Read: Is this the best time to buy a house?
For the seller:
Realistically, price: Excessive price can cause your listing to sit and get old, just like most. The prices of homes sold from the start tend to sell faster and more. A typical seller today wants $39,000 more than a typical buyer would be willing to pay. Provide incentives: Consider supporting closure costs, rate purchases, or flexible travel days to make them stand out in slower markets. Emphasise the best features. Buyers are cautious and often prefer turnkey homes, so small repairs, fresh paint and staging can make a big difference. Before investing in makeovers, check out Redfin’s redesign to test some looks. Be flexible in negotiations: Expect buyers to drive inspections, repairs and price reductions. Flexibility can be key to quickly closing. Working with great agents: With today’s markets being subtle, having a top-notch agent who has mastered local trends is more important than ever.
>>Read: How to sell your home faster – and for more money
