After years of surging home prices, limited inventory, and punishingly high mortgage rates, the U.S. housing market is beginning to show early signs of balance. Analysts at Ned Davis Research (NDR) recently noted several encouraging shifts that suggest the market may be nearing a bottom — a stage that could set the stage for renewed buying activity after years of stalled demand.
A Market Tipped Toward Sellers
The imbalance between buyers and sellers has reached its widest point in more than a decade. According to Redfin, there are now 36% more sellers than buyers, the largest gap since at least 2013. This mismatch has highlighted just how frozen the market has become, with many buyers priced out and many sellers unwilling to budge on historically high prices.
Yet, within this slowdown, NDR points to four positive developments that could ease pressure on the market.
1. Supply and Demand Are Slowly Aligning
A lack of housing supply has been one of the biggest drivers of home price growth. But the shortage is shrinking.
NDR estimates that the U.S. will add about 1.3 million new housing units in 2025, while demand slows to around 850,000 units amid a sharp pullback in household formation. That would leave the U.S. 1.1 million homes short by year's end, compared with a 1.6 million shortage at the beginning of the year.
While still a deficit, the smaller gap could start to ease some of the pricing pressure that's defined the last five years.
2. Vacancy Rates Are Returning to Normal
Both rental and homeowner vacancies have inched higher, giving buyers and renters more options.
NDR estimates that rental vacancy rates are now back to a "normal" level of 7.0%, while homeowner vacancies sit near 1.5%. For context, a LendingTree study earlier this year estimated nearly 15 million vacant homes nationwide, underscoring how empty properties have constrained available supply.
With vacancies normalizing, more inventory could reach the market, helping rebalance demand.
3. Housing Affordability Is Improving — Slightly
One of the clearest measures of affordability is the ratio of median home prices to median household income. At its peak, that ratio hit 5.4, even higher than during the 2006 housing bubble. Today, it has cooled to 4.9, NDR reports.
Home prices have eased from their highs — dipping from $442,600 in 2022 to $410,800 in early 2025 — while personal incomes have risen about 5% over the past five years. Although affordability remains strained, the trend is finally moving in the right direction.
4. Housing Looks Cheaper Relative to Other Benchmarks
Another encouraging sign: housing values are falling compared with replacement costs and stock market capitalization.
NDR calculates that the value of household real estate relative to replacement costs slipped to 169.5% in Q1 2025. At the same time, real estate values relative to domestic stock market capitalization eased to 69.8%.
Though construction costs remain high — influenced by tariffs and rising labor costs — the relative decline suggests housing is gradually becoming less overvalued compared with other assets.
The U.S. housing market is still far from "cheap." Prices remain historically high, and affordability challenges continue to weigh on first-time buyers. But with supply improving, vacancies normalizing, incomes climbing, and valuations cooling, the pieces of a healthier market may finally be falling into place.
As NDR's Joe Kalish summarized: "The housing market is coming into better balance. Prices are expensive, but house price growth is slowing."
For weary buyers, that may be the first real glimmer of hope in years.
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