Despite a series of interest rate cuts by the Federal Reserve in late 2025, the U.S. housing market has remained sluggish, with homes lingering for sale and sellers pulling listings. However, a new analysis from Berkshire Hathaway HomeServices suggests a significant shift is underway, with market dynamics increasingly favoring homebuyers.
The investment firm, led by Warren Buffett, points to stabilizing prices and increased buyer leverage as key indicators of change. At the same time, it identifies restrictive local zoning laws as a primary obstacle to solving the nation's housing affordability and supply crisis.
Key Takeaways
- Three Federal Reserve rate cuts in late 2025 failed to significantly boost the housing market, with mortgage rates remaining above 6%.
- Berkshire Hathaway HomeServices reports that buyer leverage is improving, with housing costs declining in 31 of the 50 largest U.S. metro areas.
- Local zoning laws are identified as a major barrier to new housing development, contributing to supply shortages and high prices.
- Zoning variances, which allow exceptions to current rules, are presented as a potential solution to repurpose land for needed housing.
An Unresponsive Market Meets Federal Action
Throughout the latter half of 2025, the U.S. housing market presented a puzzle for economists and prospective buyers. The Federal Reserve, aiming to stimulate economic activity after a period of aggressive inflation control, implemented three consecutive rate cuts in September, October, and December. Each cut reduced the federal funds rate by 25 basis points, bringing the target range down to 3.50%–3.75%.
This monetary easing was expected to translate into lower borrowing costs for consumers. However, the impact on mortgage rates was less pronounced than many had hoped. According to data from Freddie Mac, as of December 24, 2025, the average 30-year fixed-rate mortgage stood at 6.18%, while the 15-year fixed-rate mortgage averaged 5.50%.
These rates, while lower than previous peaks, kept many potential buyers on the sidelines. The result has been a stagnant market characterized by slow sales and frustrated sellers. Data shows that homes are staying on the market for the 17th consecutive month, and pending sales have fallen to a multi-decade low.
Market at a Glance
In response to slow sales, many homeowners have opted to delist their properties. This has further constrained the supply of available homes, creating a challenging environment for those actively looking to purchase.
A Silver Lining for Homebuyers
While the overall market appears gridlocked, Berkshire Hathaway HomeServices has identified emerging trends that signal a power shift toward buyers. The firm's analysis highlights several positive developments for those looking to enter the market.
One key indicator is price stability. The national median list price in August 2025 was $429,990, holding steady compared to the previous year. More significantly, housing costs have reportedly decreased in 31 out of the 50 largest metropolitan areas in the country.
“All of this points to buyer leverage improving,” Berkshire Hathaway HomeServices noted in its report.
With homes taking longer to sell and fewer new contracts being written, sellers may become more willing to negotiate on price and terms. This environment gives patient buyers more room to find a suitable property without facing the intense bidding wars that defined the market in previous years.
The Zoning Conundrum
As the housing crisis persists, attention is increasingly turning to the systemic issues that limit the construction of new homes. Berkshire Hathaway's report places a significant portion of the blame on local zoning laws, arguing they often hinder rather than help communities.
In theory, zoning is designed to create well-organized and functional communities by separating residential, commercial, and industrial areas. It aims to preserve property values, ensure harmony between residents and businesses, and facilitate long-term infrastructure planning.
The Purpose of Zoning
- Protecting Home Values: Ensuring that industrial or disruptive commercial activities do not negatively impact residential neighborhoods.
- Fostering Economic Growth: Allocating space for essential services like schools, supermarkets, and medical facilities.
- Planning for the Future: Reserving land for future roads, public transit, and utilities.
However, these regulations can have unintended consequences. Many zoning codes, particularly in suburban areas, prioritize single-family homes and restrict the development of higher-density housing like apartment complexes or townhomes. This often fuels a phenomenon known as NIMBYism, or "not in my back yard," where existing homeowners oppose new developments over concerns about property values, traffic, and neighborhood character.
“This puts zoning commissions into a quandary,” the Berkshire Hathaway report stated. “People are moving in but can’t find housing. When they do, the prices are sky high.”
Finding a Path Forward with Variances
The conflict between the need for more housing and restrictive local laws has led to a search for practical solutions. One such tool is the zoning variance, a formal request to a local government for an exception to existing land-use rules.
When a property owner or developer applies for a variance, a public hearing is typically held. This allows both the applicant and concerned residents to present their cases to the zoning commission. While often contentious, these proceedings can lead to compromises that benefit the entire community.
For example, a variance can allow for the revitalization of underused properties. “An abandoned shopping center can be rezoned for multi-family housing, revitalizing the area,” Berkshire Hathaway explained. This type of adaptive reuse can add much-needed housing stock without developing on open land, often utilizing existing infrastructure and bringing new life to declining commercial corridors.
As the housing market continues to evolve, the debate over zoning and land use is expected to intensify. While macroeconomic factors like interest rates play a crucial role, many experts now agree that meaningful solutions to the housing crisis must begin at the local level.
