Redfin Forecast Signals Softening, Housing Market Reaches “Tipping Point”

Dave:
For the first time in years, Redfin is forecasting a decline in US home prices, but a 1% dip. Does that mean we’re finally heading into a buyer’s market or is this just a temporary blip? I’m Dave Meyer and today I’m joined by Chen Zhao, head of Economic Research at Redfin. To break down there just released May, 2025 housing market forecast. We’ll cover what’s driving the shift in home prices where inventory is rising, why demand is lagging, and what investors and home buyers should expect. As we head into the second half of the year, this is on the market. Let’s get into it. Chen, welcome back to On the Market. Thanks for being here.

Chen:
Great, thanks for having me Dave.

Dave:
Let’s start today with what I assume is the biggest headline is that Redfin has adjusted its forecast for the year and is now projecting that home prices will dip modestly by 1% by the end of the year. Can you tell us a little bit about what data and information went into that decision?

Chen:
So our forecast for the year has changed. We still expect that mortgage rates are going to stay pretty high, but the change is really that we are expecting demand to be softer for the rest of the year and that prices will be falling by 1% by the end of the year. Like you said, the reason why we’re making this call is because what we have observed is that the ratio of buyers to sellers in the market has changed slowly over time, but now has really reached this tipping point where nationally we think most of the country is definitely in a buyer’s market. There are still some pockets of sellers markets in the northeast and the Midwest, but most of the country is really favoring buyers right now because while supply has increased, demand has really started to pull back. So just to really put some numbers on this, what we’re observing is that nationally there’s about 34% more sellers than buyers active in the market right now. And importantly, this ratio is the highest that we’ve seen in our data and we think it’s the highest. Going back probably at least 13 years, you would probably have to go back to the aftermath of the financial crisis to see a situation that’s similar to this. That’s why we feel pretty confident that prices are going to start falling just a little bit.

Dave:
Yeah, that makes sense. I saw that article that you put out super helpful for everyone in the industry, so thank you for doing this research. The number of 500,000 is kind of hard to wrap your head around. So you said your data goes back to 2012, so is the more important thing the ratio, like you were saying that it’s basically 34% higher?

Chen:
Yes, that’s right. We do headline by saying there’s about a half a million more buyers and sellers active in the housing market nationally right now. But you’re right. What does that mean? How many buyers are there normally? How many sellers are there normally? Really it’s about that ratio that there’s about 34% more sellers than buyers, and that’s at the national level. We also do look more regionally because for the housing market it really is, it’s all local. So we look at the top 50 metros for example, and we see that most of them, about 31 of them are buyer’s markets. And in some the ratio is pretty extreme. So in places like Miami or West Palm Beach, we actually see three times as many sellers as buyers right. Now on the flip side, you also see markets like Newark, New Jersey where there’s actually 47% more buyers than sell it. So whether you’re looking nationally or locally, it’s really that ratio that

Dave:
Matters. If there’s 500,000 more and this ratio is pretty high, why are prices still up right now? Because nationally I think you still have prices up year over year, like two 3%, something like that. So why is that still going on if this ratio is so high?

Chen:
So there’s a lag basically that has to get worked through. So on median sale price for example, what we see in our data is that right now median sale price is up about 1.3% year over year and the latest data up through last weekend. And that hasn’t really fallen because at the beginning of the year in January, that was closer to about 5%. And what we also did in this analysis was that we looked at how the ratio of buyers to sellers relates to changes in median sale price. And what we see is that actually median sale price growth really seems to follow this ratio of buyers to sellers pretty well, but it follows it with a lag of about three to six months. So that’s why we’re making this call about prices by the end of this year because just based on what we’re observing about the ratio right now, we feel pretty confident that if you pull that through to the end of this year, that does mean about negative 1% sale price growth.

Dave:
That makes a lot of sense to me because I would imagine just thinking about it sort of mechanically how this all plays out is there are more and more sellers relative to buyers, but sellers haven’t all necessarily accepted that we’ve shifted into a buyer’s market. They’re pricing their properties as they would’ve six months ago or a year ago or whatever. And even if it’s not selling, they’re allowing it to sit on the market and usually there needs to be some level of pain or urgency for the seller to sort of accept a lower offer. And so that might just take some time and so you’re expecting this fall or something, we will start to see prices come down.

Chen:
I think one of the other things that we’re observing in the market right now is there’s this growing gap between what we call median list price and median sale price. So median list price is a price on new listings and that is still up for almost 5% year over year right now in our latest data. But median sale price is steadily falling. So that gap is growing and what’s happening is you’re seeing more price drops that are happening and you’re also seeing that the sale to list ratio is falling. On top of that, you’re also seeing non-price concessions increasing in our data as well. So basically sellers are coming in with slightly outdated expectations and then they’re having to come to terms with the reality of the market right. Now.

Dave:
One more question about the national market then I do want to dig in a little bit to some of the regional trends that you’re seeing why only 1% people have been predicting crashes for years. So why do you think it will remain such a modest correction?

Chen:
Really the answer is that it is very rare and difficult for home prices to actually fall in this country. So you have this backdrop, but first of all, there’s still just a home shortage in this country. We’re short millions of units of housing. And then on top of that, if you think about what’s happened in the mortgage market since the financial crisis, underwriting standards have increased a lot. So homeowners are actually sitting on a ton of equity. That means delinquencies are generally fairly low. There’s been an uptick in FHA delinquencies, but generally speaking across the board delinquencies are fairly low. We don’t expect there to be a lot of foreclosures in general. Lenders are more reluctant to go down that road of foreclosure versus just modifying loans these days. So we don’t expect there to be very many people who are going to be underwater on their house.
We don’t expect a lot of forced sales and without those mechanisms forcing prices to come down, what you actually see is that sellers come to the market. They might not like the prices that they’re seeing, so they just say, well, you know what, I don’t really have to sell my house. And so in our very latest weekly housing market data, we do see that new listings are starting to tick down just a little bit. Now this might be a little blip, but it might be the start of a longer trend. So we don’t want to hang too much on this. This is one data point right now, but it’s consistent with this idea that once sellers see that look, it’s not fair to favoring sellers right now. They might start to pull back a little bit, but we would still forecast that prices are going to fall through the end of this year. Because what I was just saying, based on what we see right now about the ratio of buyers to sellers, we don’t need conditions to worsen to see negative price growth. We sort of just need this to just hold essentially.

Dave:
That’s super interesting. I was actually going to ask you that question because we’ve been wondering for years now when new listings would start to go up and they have been going up and generally that’s a good thing that we were at an extremely low level of transactions and new listings, and so having that go up is good, but without the corresponding demand to absorb those new listings, I was just curious if people will start pulling back because they’ll just wait until economic conditions maybe become a little less murky than they are right now. I’m sure everyone wants mortgage rates to fall. We’ll see if and when that happens, but even I think they might just choose to do what a lot of people are doing right now, which is just wait and see more about the economy because everything seems so unclear. We do have to take one quick break, but when we come back, Chen, I’d love to talk to you a little bit more about the regional variances that you’re seeing in your data. We’ll be right back. Welcome back to On the Market. I’m here with Redfin’s Chen Zhao, and we are talking about how we have moved into a buyer’s market on a national level. You told us a little bit Chen before about places like Miami and I think there was a bunch of other places in Florida. We’re always picking on Florida these days for being in sort of the most significant buyer’s market. Is it just Florida or what are some of the broad regional trends you’re seeing?

Chen:
Yes, so in general, I would say Florida is kind of the epicenter of a lot of the weakness that we are seeing. And yes, poor Florida is always being picked on these days, but you do see similar trends happening in places like Texas for example, and really more just in the Sunbelt and in the South in general where there’s just been a lot more supply. We see similar conditions, although none are quite as extreme as what we’re seeing in South Florida. And the places where you see that there is still strength are pockets of the Midwest. And also in the Northeast we do out of the top 50 largest metro areas in the country, we see that there are about 12 that we call balance, meaning the number of buyers and the sellers that we see in the market is pretty similar but within 10% of each other. And then we actually still see seven markets that we call them sellers markets. So these are predominantly in the Northeast. I had mentioned that the most extreme case here is New York, New Jersey where there are still 47% more buyers than sellers. A lot of these markets we’ve noticed tend to be, for example, places around New York City but not in New York City. So these are places where supply has been more constrained and they are more affordable alternatives to New York City itself.

Dave:
Okay, and do you expect that to continue? Is everything going to kind of shift down a little bit or could depreciation in some markets or perhaps even accelerate?

Chen:
It does seem like it is just a matter of time in some instances because what’s happened is that supply has slowly built up. We’ve been observing this over the last two to three years. It’s been a very slow process, but at some point it reaches tipping point and the south is ahead of the Midwest and Northeast. They build a lot more, but at some point these other regions start to catch up. So we do expect that to continue to happen because what’s driving the fading of this mortgage rate lock-in effect is just people’s life circumstances and the passage of time purely at some point people just have to sell and move, but what’s more uncertain is the demand side. What we’re seeing nationally and also in places like Florida and the South is that it’s not just that supply has built up, that demand has also fallen and the demand has fallen in different places for different reasons.
But just really broadly speaking, one big driver is just this macroeconomic and policy uncertainty that we’ve had since the start of the year. And that I think can really fluctuate and change over the next six months, over the next few years. So it may be that for example, a lot of these policies really change over the next few months and then we actually could see mortgage rates falling. I mean that’s not in our forecast, but there’s so much uncertainty right now and you can see demand increasing, so we don’t have to reach the same sort of tipping point in the remaining pockets of sellers

Dave:
Markets. There is one more thing in your report that I wanted to touch on, which is sort of the difference between the single family market and condos specifically seem to be really weak. Can you tell us more about that?

Chen:
Yes. So when we look by property type, what we see is that the condo market seems to have about 83% more sellers than buyers right now. And that’s just very different than the single family market where there’s only 28% more sellers than buyers. Interesting. So I think that some of this is geography for sure, because a lot of these condos are going to be, for example in places like Florida where the market is weaker or they’re also in large urban areas like New York City or in San Francisco or other cities that just have yet to really recover fully from the pandemic still. So I think a lot of this is very much correlated with geography, but the condos are where we’re seeing most of the weakness.

Dave:
That’s an important thing to keep an eye on because a 1% drop in prices as an investor is basically flat. I don’t really think about that that much, but if you’re saying 83% more condo seller than buyer, you might start to see more than 1% drops in condos, right?

Chen:
Yeah, that’s right. And a lot of these markets, especially in condos, you’re already seeing prices falling. So this kind of 1% drops sort of across the board. But absolutely, I think you could see greater weakness happening in the condo market. I agree with you that for investors a 1% drop it is pretty much kind of just flat, but for the average buyer or seller, I think it does make a little bit more of a difference. Incomes are still increasing. So if you have incomes increasing 4%, we have prices coming down 1% on a real basis, affordability is improving and it might matter just enough for some buyers in a world where mortgage rates are really quite stuck near 7%.

Dave:
And do you have any thoughts on what changes this? Because as an investor what would matter to me is how long is this going to be going on for years? Is this a six month thing? Do you have any insight into that? I know everything’s uncertain, but have you thought about that much?

Chen:
It might be useful just to back up and think about how our forecast has changed. So last December, we were still forecasting that home prices would be increasing about 4% year over year through 2025. And now we’re really changing that forecast. And so what has changed, and it really has been that since the start of the year trade policy, immigration policy, but also for example, Congress is talking about the budget reconciliation bill and how that’s going to affect both economic growth, but then also the budget deficit. There are some real policy surprises that have happened since the start of the year, and I think that has contributed a lot to our forecast. But this volatility I think really just tells you that things can really change on a dime pretty quickly. So I think what would change our forecast a lot is if very specifically tariff policy were to change significantly over the next few months.
So what we have seen is that since early April, but maybe a little bit even before then, the average tariff rate in this country has increased substantially and then it’s been very volatile. But what’s happened is that even though it’s been very volatile, it’s actually stayed at a very high level. So right now today, the average tariff rate in this country is about, I’d call it 13 to 15% in January. That was 2.5%. So we went all the way up until 25, 20 8%. So we come down a little bit, but we’re still a lot higher than where we were. It’s not crazy to imagine that that could come down a lot more if the administration were to decide to prioritize other policies, for example, or to change its mind on certain priorities if that were to happen. I think it’s possible that a lot of what buyers and economists are nervous about in terms of the economic impact of these policies, they don’t necessarily have to come to fruition because they haven’t come to fruition yet. And so it’s possible we could still reverse course and not see that happen In that case. I do think that the end of the year for the housing market or maybe more beginning of 2026 could look pretty different than the track that we’re currently on.

Dave:
Like you said, the impact of tariffs haven’t really materialized yet. That’s not necessarily surprising. This is another one of those things that most people expect to take a little while to show up in the data. So I’m personally not super surprised by that. But even if they do materialize, is it something that’s going to directly impact housing or is it kind of these secondary impacts where people have fears of inflation that might keep bond rates higher or perhaps just people have to tighten their belts if inflation does actually materialize? Is it kind of those secondary things or is there a more direct link to housing?

Chen:
The way I think about the channels flowing from tariff policy to the housing market are a few different things. One is obviously just if you’re taring input costs that are relevant to building materials, then that’s going to impact the cost of building homes. So we know that generally if the cost of building homes increases and supply of homes has to come down and the price of homes, that’ll probably push home prices up a little bit. So that’s one kind of very direct channel. But then there’s kind of the broader economic channels. And so you touch on some of this. One is through interest rates. As long as we think that there is a possibility of higher inflation, mortgage rates have to stay pretty elevated, although you’re balancing that at the same time with this possibility of economic and labor market weakness, which would push rates down.
But so then the Fed has this balancing act of which one do you favor? I would probably tend to say that the Fed would keep rates higher rather than lower. That’s my view, although I think people may disagree on that, but I think this kind of like a third channel is really just through that kind of general economic weakness that if we start to see real weakness in the labor market that might really sort of propagate on itself, where then people are going to be a lot more worried they might actually be losing their jobs. You could see stock market impacts. There’s a lot of different impacts on demand. I think that yes, people are jittery right now, but you haven’t seen the hard data come through yet, and it is unknown how much of an impact there will be on the hard data and it’s unknown what the timing will be, but as long as we keep tariffs pretty high, the higher they are, the longer they are high, the more there is this idea that there’s another shoot that has yet to drop.

Dave:
Let’s take a quick break, but when we come back, I have a few more questions for Chen specifically about rents and what’s going on on a national and regional basis there. We’ll be right back. Welcome back to On the Market, I’m here with Chen and we are talking about everything with the housing market. We’ve covered what’s going on with the buyer’s market, some regional differences and what to expect for the rest of the year, at least in terms of property values. But let’s turn our attention to rent, which it’s kind of a big headline here. Chen, I’m reading that asking rents are falling in 28, major US metros the most in two years, so that’s more than half. So I just want to clarify that for everyone because 28 doesn’t sound like that many, but if you’re just looking at the top 50, that’s a lot. So what’s going on here? Can you tell us some of the trends? Because we’ve been hearing saying, thinking that rents would start going back up when some of the supply glut from multifamily started to work itself out. It sounds like that’s not happening. So what do you think is behind this decline in rents?

Chen:
Yeah, so this data covers the month of May, and what we’ve seen is that for the past, call it two years or so, rents have nationally speaking been pretty flat to slightly negative to sometimes slightly positive, but sort of bouncing around a little. And I think this is really keeping with that trend and we actually expect this to really continue through the end of this year. This kind of flat to slightly negative to slightly positive trend. Obviously this is on nominal terms, so if you think about this on real terms, it means that rents are actually falling,
But we also do expect that at some point rents will start ticking up again. So I agree with that thesis. I just think the timing of it is the tricky part because it is true that the supply glut, if you look at the multifamily housing units that are under construction currently, we have worked through most of that backlog, but there is still some left. So as long as we have some to work through, I think there is supply coming on that’s going to make it hard for rents to really increase. But on the other hand, the housing market is getting weaker. Buyers are pretty hesitant. We do think there are going to be a significant number of buyers that instead of buying will be thinking about renting. And then also we have a lot of more people now who are interested in selling and some of those people who are selling may not end up buying again because of the high rate environment, they might actually switch to renting. And so we do think there is going to be more demand in the rental market coupled with this backlog shrinking of supply. So if I had to make a guess today, I would say I think that rents could be ticking up in 2026. I just don’t think it’s a 2025 story though.

Dave:
I generally agree. I think even if the macroeconomic situation was a little better, again, this is another thing that lags and takes time. And we know that deliveries for multifamily, sort of the pendulum hasn’t swung all the way back in the other direction. We know it will just based on permit data, but that just hasn’t fully happened yet. And even once that does, I think it might take a little while to get there. What about regional stuff here? Is it kind of similar? Does it sort of follow the multifamily building trends in terms of what markets are seeing the biggest declines versus the ones that are more resilient?

Chen:
Yeah, I mean we do see weakness in places like Austin where we have seen a lot of weakness in the housing market and in the rental market. But I think in general, the data on rents is a little bit more volatile than the data on the housing market when it comes to the pricing. So in the Midwest for example, you see rents following places like Minneapolis and Columbus. So these aren’t places where the housing market is going to be showing a little bit more strength. And even places like Tampa, which is pretty weak in the housing market, you actually seeing rents increasing there. So it’s not as clear of a regional story as the housing market is. And I think this is partly because rents have been so flat for so long now.

Dave:
Well, thank you so much, Jen. This has been really enlightening. Is there anything else from your research you think our audience should know?

Chen:
Really what we’re focused on right now is kind of this bigger picture macroeconomic situation because times are unusual right now where macro policy is just such a big determinant of outcomes in the housing market. So we’re very focused on all the tariff stuff that we have talked about. We’re also very focused on policy changes like the privatization of the GSEs budget stories like the budget reconciliation bill and how that will affect both salt deductions in different parts of the country, but also affect the budget deficit and how that will flow through to mortgage rates. So we have very much focused on sort of that big picture question right

Dave:
Now. Yes, and why I still have a job talking about this every day because it keeps shifting, but it is incredibly important to the housing market. So thank you so much for sharing your insights with you, Chen. We really appreciate you being here.

Chen:
Of course. Yeah. Thanks so much for having me again.

Dave:
Of course. And thank you all so much for listening to this episode of On The Market. We’ll see you next time.