U.S. home prices fall in May 2025 as Redfin reports rare national housing market decline

Redfin Corporation (NASDAQ: RDFN), a leading technology-powered real estate brokerage and home-listing platform, reported that U.S. home prices fell 0.1% month-over-month in May 2025 on a seasonally adjusted basis. This marks just the fourth recorded monthly decline in over a decade, reinforcing signals that the post-pandemic housing bull run may finally be giving way to broader affordability constraints, buyer fatigue, and inventory mismatches. This rare softening comes amid a historic phase where mortgage rates remain anchored near multi-decade highs and housing affordability indexes sit at some of their weakest levels since 2006.

The 0.1% monthly drop contrasts with the 3.6% year-over-year increase in prices for May 2025—an annual rate of growth that continues to slow sharply from the 4.1% recorded in April and now represents the first sub-4% year-on-year gain since July 2023. The latest data from the Redfin Home Price Index (RHPI), which applies a repeat-sales methodology to track price changes in single-family homes, paints a nuanced picture of cooling across major metros even as certain East Coast markets remain hot.

This shift coincides with a broader cyclical deceleration that has played out across key economic indicators. The Federal Reserve’s extended high-rate posture, instituted to tackle post-pandemic inflation, has frozen much of the marginal demand in rate-sensitive sectors like housing. Mortgage rates hovering around 7% continue to choke affordability, keeping many would-be buyers on the sidelines.

What’s Causing the Current Decline in U.S. Home Prices?

Several forces are converging to produce a rare period of negative price momentum in the housing market. On the demand side, buyers have grown increasingly cautious in response to unaffordable monthly payments driven by elevated mortgage rates and still-high home prices. Redfin’s data shows that only 31.2% of homes sold in May 2025 went for over their asking price—marking the lowest share for any May in the past five years and an unmistakable signal that seller power is eroding.

Supply dynamics, meanwhile, are trending in the opposite direction. While new listings have gradually returned as homeowners adjust to the new rate environment, buyer absorption has not kept pace. This has led to a slow but steady build-up in active inventory. With pending sales volumes ticking down across many metros, price corrections are increasingly necessary to close deals.

Redfin Senior Economist Sheharyar Bokhari emphasized that more sellers are adjusting their price expectations in real time. As homes increasingly sell below asking prices and time-on-market elongates, seller behavior is shifting toward realism. The long-feared ‘buyer’s strike’—delayed by post-pandemic FOMO and low inventory—is materializing as economic uncertainty and rate-driven affordability ceilings take hold.

Which U.S. Cities Saw the Largest Home Price Declines in May?

Redfin’s metro-level breakdown reveals that home prices declined in 32 of the 50 most populous U.S. metros on a seasonally adjusted monthly basis. The most pronounced drop occurred in Charlotte, North Carolina, where prices fell 2.7% month-over-month. San Francisco and Seattle also saw significant cooling, each recording a 1.3% decrease. These three metros have several factors in common: they experienced aggressive appreciation during the 2020–2022 boom, have relatively high property tax bases, and are exposed to tech-sector volatility that has impacted local job markets.

Conversely, some markets are still posting strong monthly gains. Nassau County, New York, saw home prices climb 2.1%, followed by San Diego (1.6%) and Fort Lauderdale (1.5%). These areas benefit from more favorable supply-demand balances, attractive tax regimes, or in-migration trends that have created new pockets of demand even as the national tide ebbs.

The uneven cooling underscores how regional fundamentals—employment patterns, remote work stickiness, local supply elasticity—continue to shape housing trajectories far more than broad monetary policy alone.

Which Metros Are Leading or Lagging in Year-Over-Year Price Growth?

Looking at annual trends, five major metros are still recording double-digit price growth: New York City (12.4%), Nassau County (11.3%), Detroit (11.2%), Philadelphia (11%), and Chicago (10.2%). These markets share a unique mix of post-pandemic resilience, constrained urban housing supply, and recovering affordability relative to coastal peers.

New York’s rebound, in particular, marks a turning point. After experiencing sluggish price growth in 2022, the city has seen revived demand from both domestic and foreign buyers, even amid high financing costs. Detroit’s gains are tied to a mix of affordable housing inventory and economic diversification, while Chicago and Philadelphia benefit from relatively stable labor markets and robust millennial household formation.

On the downside, Tampa, Florida, posted the steepest year-over-year price decline at -5.5%, followed by Austin, Texas (-3.6%), and San Antonio, Texas (-2.4%). These metros saw large pandemic-era spikes and are now undergoing mean reversion. Overbuilding in certain suburbs, combined with investor retreat and declining affordability, have intensified the pace of decline. For Austin and San Antonio, the tech-driven speculative buying spree of 2021–2022 is now reversing, revealing the limits of ultra-fast growth in markets without deep-rooted affordability or infrastructure to sustain demand.

How Are Elevated Mortgage Rates Shaping Buyer Psychology and Institutional Flow?

At the heart of today’s housing slowdown lies a structurally expensive mortgage market. Despite signs of economic cooling, the Federal Reserve has maintained a restrictive rate regime well into 2025, resulting in average 30-year fixed mortgage rates that continue to hover around 7%. For context, this is more than double the rates available in early 2021.

The impact is two-fold: it not only disqualifies many buyers from securing sufficient loan amounts but also discourages current homeowners—many of whom locked in ultra-low rates—from selling. This has distorted normal supply-demand mechanics and created a two-speed market: stagnation in mid-tier homes and modest strength in luxury or cash-driven segments.

Institutionally, real estate investment activity has pulled back. Hedge funds, private equity players, and REITs have either paused homebuying programs or redirected capital toward build-to-rent strategies where long-term rental yields offer more predictable cash flow. Publicly listed real estate platforms like Redfin Corporation (NASDAQ: RDFN) are navigating revenue pressures due to reduced transaction volumes, commission compression, and weakened advertising spend.

Recent 10-K filings by Redfin showed top-line revenue of $1.43 billion for FY2024, with a net loss of $124 million, underscoring profitability challenges in a volume-sensitive model. Analysts have shifted to a more conservative outlook, with consensus stock ratings in the “Hold” range pending clearer market recovery signals. Some institutional flows have rotated into diversified real estate ETFs, away from pure-play platforms exposed to transaction volatility.

What Should Sellers, Buyers, and Real Estate Professionals Expect Next?

For sellers, the takeaway is clear: the pricing power seen in 2020–2022 is no longer assured. Markets are correcting toward balance, and sellers need to adopt realistic listing strategies, especially in metros with rising inventory and reduced bidding activity. Homes priced aggressively without supporting value will face longer days on market and may ultimately sell below list price.

Buyers, especially those with cash or significant down payments, may find more negotiable environments in 2025 than at any time since the Great Recession. Still, mortgage-dependent buyers face hard math. Even with price reductions, high monthly payments remain a barrier. Some may continue to delay purchases in hopes of a rate cut or further price easing.

For real estate professionals—agents, brokers, and mortgage consultants—the shift demands a return to fundamentals. Transaction velocity is slowing, and relationship-based business will likely outperform volume-based churn models. Brokerages with strong data tools and hyper-local expertise will maintain an edge as markets fragment and localized insight becomes more critical.

What’s the Forward Outlook for Redfin Corporation (NASDAQ: RDFN) and the U.S. Housing Market?

Looking ahead, Redfin Corporation faces a crucial pivot period. While its platform continues to attract traffic and its data is among the industry’s most timely, transactional softness is expected to weigh on earnings through the second half of 2025. Analysts expect the company to focus on operational efficiency, tech stack consolidation, and potential M&A exploration in digital mortgage services or AI-driven listings to offset core market weakness.

In broader terms, housing analysts anticipate further price stagnation or modest month-over-month declines through Q3 2025 unless the Federal Reserve signals imminent rate relief. However, the downside risk appears contained by demographic tailwinds and relatively stable employment in large parts of the U.S. economy.

Investor sentiment, though muted, has not collapsed. Institutional activity in Redfin’s equity remains modest but stable, and any signs of mortgage rate relief could reignite positioning in housing-related equities. Until then, expect a cautious market that rewards discipline, data fluency, and regional agility over national-scale exuberance.

Home prices in the U.S. have entered a period of rare and measured decline, underscoring the tension between sustained economic resilience and affordability fatigue. While certain metros like New York, Philadelphia, and Chicago continue to post strong annual gains, others such as Charlotte, Austin, and Tampa are retrenching. For Redfin Corporation and the broader real estate ecosystem, May 2025 could mark a turning point where the market shifts definitively from seller-driven exuberance to a more evenly balanced, if still strained, phase of normalization.