U.S. Housing Market Shows Signs of Cooling Amid High Mortgage Rates

In March 2025, the U.S. housing market experienced a deceleration in home price growth, with the S&P CoreLogic Case-Shiller U.S. National Home Price Index reporting a 3.4% year-over-year increase, down from 4% in February . This slowdown occurred despite the typical spring uptick in market activity.

Concurrently, the Mortgage Bankers Association (MBA) reported a 7.1% decline in its Refinance Index during the week ending May 23, bringing it to a three-month low . This drop is attributed to the average 30-year fixed mortgage rate approaching 7%, which has deterred many homeowners from refinancing.

The combination of slowing price growth and reduced refinancing activity suggests that the housing market is under pressure from elevated borrowing costs. Analysts from Capital Economics warn that persistently high mortgage rates could further strain the market, potentially leading to a sustained
Looking ahead, Goldman Sachs forecasts that the average 30-year mortgage rate will settle around 6.75% by the end of 2025, slightly below current levels but still high enough to impact buyer affordability . Meanwhile, a panel of over 100 housing experts surveyed by Fannie Mae anticipates home price growth to moderate to 3.4% in 2025 and 3.3% in 2026.

Economists like Lindsey Piegza of Stifel express concerns that high housing costs continue to exert upward pressure on inflation, complicating the Federal Reserve's efforts to achieve its 2% inflation target . Additionally, Ralph McLaughlin, Senior Economist at Realtor.com, notes that the market is increasingly becoming a buyer's market, with sellers more willing to negotiate on price and offer concessions.

In summary, the U.S. housing market is showing signs of cooling, with slowing price growth and reduced refinancing activity amid high mortgage rates. While some regions may experience localized resilience, the overall trend points toward a more balanced market, offering potential opportunities for buyers in the latter half of 2025.