We’re halfway through the year, and the average 30-year fixed mortgage rate (as reported by Bankrate) has seen a range of more than 70 basis points. The 10-year U.S. Treasury yield has moved within an 80 basis point range. The last time the average 30-year mortgage rate dipped below 6% was in August 2022.

The rate volatility has put a pause on housing demand, and that’s reflected in the moderation of home prices since the start of the year. Existing homes priced between $250K and $750K are seeing around 1% year-over-year price appreciation, while homes under $250K are experiencing negative price growth. At the higher end of the market, prices are still appreciating at over 5% annually.

On the supply side, we hit 4.4 months of inventory in April, the highest for that month since 2016. This marks a significant improvement from the historic lows we saw between 2021 and 2024.

While existing home sales data lags, pending home sales provide a more forward-looking view. In April, pending sales were down more than 3% year-over-year and month-over-month on an unadjusted basis. This points to a market where home prices are likely to remain steady and where average annual price growth in 2025 is expected to stay below 5%. Even if home prices were to flatline nationally, it wouldn’t solve the affordability issue, considering prices rose 50% in just two years during the pandemic-era housing boom.

The most promising development in 2025 is inventory. It’s rising and returning to healthier levels, with indicators like price cuts (now above 30%) suggesting that the trend could hold. This improvement is largely rate-dependent, and with mortgage rates unlikely to shift significantly from current levels, it’s fair to say that inventory conditions will continue to stabilize.

The two key factors in housing affordability are rates and home prices. Increased inventory will help ease pressure on prices, but mortgage rates continue to limit how low the average monthly payment can go. Inventory alone won’t solve the affordability challenge, especially given the retreat from builders. Still, the improvements we’re seeing are helping to prevent the situation from deteriorating further, and that brings a level of stability to a market that’s become used to extreme volatility over the past five years.