The U.S. housing market showed clear signs of a slowdown in July 2025, as high costs and economic uncertainty finally caused buyers to hit the brakes. From falling sales and prices in California to a record rate of canceled contracts, the data paints a picture of a cooling market. Here’s a breakdown of the key trends and what they mean for you.
California Leads the Slowdown
The California housing market often serves as a bellwether for the nation, and its July numbers were soft. For the fourth month in a row, home sales fell compared to last year. This pushed year-to-date activity into negative territory for the first time in 2024.
The statewide median home price also dipped year-over-year for the third consecutive month, reaching a five-month low. Meanwhile, housing inventory climbed to its highest level in nearly six years, giving buyers more options and less urgency.
Why Are So Many Buyers Canceling Contracts?
This hesitation was felt nationwide. In a stunning shift, a record 15.3% of home-purchase agreements were canceled in July—the highest rate for any July since at least 2017.
This record-high cancellation rate is a classic sign of a "buyer's market." With more homes to choose from and persistent affordability challenges, buyers are feeling empowered to walk away if an inspection reveals issues or if they simply get cold feet. Markets like San Antonio, Fort Lauderdale, and Jacksonville saw the most cancellations.
Construction Sends Mixed Signals
The construction data was a tale of two sectors:
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Single-Family Weakness: Building permits for single-family homes continued to decline, indicating builders are growing cautious about future demand.
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Multifamily Strength: Conversely, construction on multi-unit buildings remains resilient, fueled by strong rental demand as high mortgage prices push more people out of the homebuying market.
Investors Feel the Pinch
It wasn't just traditional buyers pulling back. Fix-and-flip investors also scaled back their activity in Q2 2025. Rising costs for materials and labor, coupled with slowing home price appreciation, made the math on flips more challenging, especially in regions like Florida and Northern California.
The Light at the End of the Tunnel: A Potential Rate Cut
The biggest news offering hope to buyers and sellers came from Federal Reserve Chair Jerome Powell. At the annual Jackson Hole symposium, he signaled that an interest rate cut in September is likely.
Powell stated that the Fed is growing more confident that inflationary pressures are easing and is now turning its attention to rising risks in the labor market. Following his comments, mortgage rates posted their biggest single-day drop in weeks.
Bottom Line
The July 2025 data confirms the U.S. housing market is in a clear cooldown phase, driven by persistent affordability issues and buyer caution. However, this shift is creating a more balanced playing field. Buyers are gaining negotiating power but remain sensitive to high costs, while sellers must adjust their expectations to compete in a less frenzied market. The potential for a September rate cut is the key variable that could thaw this freeze, offering relief and potentially reigniting demand in the months ahead.
Would you like more insights on how these trends could impact your real estate decisions? Let us know! To schedule a meeting, email us at [email protected]
For more insights and expert analysis on real estate trends, visit the California Association of REALTORS® (C.A.R.) at www.car.org
