Prices continue to rise, and buyers are giving up on their dream locations – or just waiting on the sidelines
Home prices continue to rise in some of the largest metropolitan areas of the country, and the median housing payment in the US hit an all-time high in early May, causing some buyers to settle on a new home or sit out completely.
Redfin reported on Thursday that the median US monthly housing payment reached an all-time high of $2,868 during the four weeks ending May 4. Meanwhile, a report from the National Association of Realtors (NAR) showed that more than 80% of metro markets saw home price gains in the first quarter of 2025.
Bob Driscoll (pictured top), senior vice president and director of residential lending at Rockland Trust, is seeing buyers struggling to overcome increasing prices.
“If I’m a realtor, I don’t know how to keep buyers motivated,” Driscoll told Mortgage Professional America. “They know a house lists for $600,000, and they know the intended price is probably $700,000.”
And while those sellers can take the extra $100,000 to their next house, Driscoll notes that doesn’t help first-time homebuyers looking for their starter home.
“Who it leaves out is first-time homebuyers,” Driscoll said. “They’re sitting there, and if they don’t have deep pockets behind them, they don’t have the capability to manage the difference in that payment. And then, if it doesn’t appraise out at that higher price, there’s a lot of risk there.”
Homebuyers start to stretch and settle
Not only are potential homebuyers challenged by affordability in the housing market, but they are also faced with affordability issues in their day-to-day lives. The market volatility caused by tariffs isn’t helping either. Due to affordability challenges and risks of higher costs ahead, people are opting to remain in the rental market rather than searching for a new home.
Melissa Cohn of William Raveis Mortgage says mortgage buyers are in limbo as tariffs and rate uncertainty cloud the market. With Fed cuts likely delayed, the second half of 2025 may fall short of expectationshttps://t.co/rLNYRvwp5F
— Mortgage Professional America Magazine (@MPAMagazineUS) May 8, 2025
“Because there’s no housing, rental pricing has gone up as fast as housing prices have gone up,” Driscoll said. “People are trying to figure out how to stretch dollars at the same time, paying bills. It’s not like they’re sitting here saying, ‘Let me rent. Step back and save some money.’ No, it’s because grocery costs are up. Heating and gas bills for the winter were extraordinarily high.
“Then, you have rental prices. You’ve got landlords saying that they can get, for a house in South Boston, three bedrooms, $4,500 a month.”
Redfin’s report also noted that pending home sales are down 3.9% year over year, the largest decline in three months. And this is despite home inventories rising, as Redfin notes, with the total number of homes for sale increasing 13.6% year over year.
But affordability, especially in some big cities, remains challenging. According to NAR, 26 markets, or 11% of metro areas, saw double-digit price increases year over year.
Driscoll notes that this is causing some buyers to give up on their dream homes or ideal neighborhoods and move farther away from city centers to find a home that fits their budget.
That’s when the mental gymnastics start for potential buyers,” he said. “You’re looking at all this and trying to figure out where they fit in the equation. They think about moving farther away from the city. They get away from having all the city around them. And those are the things where they start to compromise what’s important to them.”
Hope for normalization, eventually
When buyers start to compromise on what is important to them, especially first-time home buyers, it makes the homebuying experience less special, according to Driscoll.
“When you see them in the first three to six months of a preapproval, you see them talk about what their goals are and where they want to be,” he said. “When they get the second preapproval, they start talking about buying a smaller home or even a condo instead. When that doesn’t help, they start thinking about going to an area where they might not be within 30 miles of family and friends.
“There is an absolute correlation between happiness and home ownership, but it also includes location.”
Driscoll noted the significance of buying a home as an investment in the future, and said he doesn’t want to see buyers lose out on that joy.
“I want them to own a home and create wealth, because the beauty of home ownership is you will create generational wealth,” he said. “But, at the same time, I want them to enjoy it. Just because you own Apple stock doesn’t mean you will enjoy your Apple phone anymore. But living in a home, in the right spot, they will love it. When they compromise on that, that’s when the fatigue starts to set in.”
For brokers and loan officers, Driscoll believes they need to remind potential buyers to have patience, if possible, and to believe that the current turbulence in the market will eventually smooth out.
“It’s hard for us on the lending side to give them real good advice other than patience,” he said. “It’s understanding what the market looks like, and when the market pivots, the more educated you are, the more you’ll be ready to pounce. There will be a time when this normalizes. I know it doesn't seem like it, but it will. Know that patience is going to be in your best interest at the end of the day. You'll find the right house at the right time.”
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