Spring is typically when the housing market bursts into a frenzy of open houses and bidding wars. But this spring…well, where do we start?
Take mortgages: Although rates have been in a holding pattern for weeks, a downgrade of the US’ credit rating caused bond yields to rise, and mortgage rates along with them. Rates for a 30-year fixed-rate home loan surpassed the dreaded 7% threshold on Monday and currently hover at 7.05%, according to Mortgage News Daily. Mortgage applications, which had been rising for weeks, abruptly dropped by 5.1% according to the Mortgage Bankers Association’s seasonally adjusted index released Wednesday.
Or how about the sorry state of home construction? Squeezed between tariff-induced price hikes on imported materials and an immigration crackdown draining the industry’s labor force, housing starts rose a mere 1.6% in April to an annual pace of 1.36 million. That’s down 25% from just three years ago, when builders were cranking out 1.83 million brand-new homes a year. Top homebuilders Lennar, DR Horton, and Toll Brothers all suffered stock slumps this spring, with Toll Brothers reporting a 3.5% drop in revenue last quarter earlier today.
Meanwhile, the existing-home market isn’t faring much better. Sales slipped by 5.9% in March to a seasonally adjusted annual rate of 4.02 million, according to the National Association of Realtors. Even stubbornly high home prices finally seem to be faltering, with Redfin reporting a 0.1% decline in April on a seasonally adjusted basis—the first month-over-month drop since September 2022. But is 0.1% enough to entice homebuyers off the sidelines? Doubt it.
Where will housing go from here?
All in all, the housing market’s getting walloped with a ton of crazy curveballs that would-be homebuyers can’t control. Even before tariffs hit the fan, homes were already insanely expensive—but under these latest stressors, cracks have appeared that point to serious problems in the housing market.
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So, what does this all mean for housing during the rest of 2025? Although the number of homes for sale will likely continue to rise through the summer season before sloping downward toward fall, little consensus exists around the future of home prices. Some forecasters like Zillow are downright bearish, projecting that home prices will drop -1.7% between March 2025 and March 2026. But other forecasts predict a price hike, with both the National Association of Realtors and Wells Fargo anticipating a 3% increase in 2025.
Mortgage rate forecasts are equally murky. Although many analysts had expected that rates would sink, recent changes in the US credit rating may have thrown a wrench in that. All eyes remain on the Federal Reserve’s next meeting in mid-June. The CME FedWatch tool currently anticipates nearly a 98% chance that the Fed will hold rates steady, so relief in the form of a rate cut probably isn’t in the cards soon. That might mean this summer’s home-shopping season will continue to be a dud.—JD
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