Housing finance outlook 2025: It's a cruel, cruel summer

After a tepid Spring homebuying season, housing market headwinds continue to challenge demand for homebuying, but improved for-sale supply is providing buyers with more options and helping to keep softer price pressures for those looking to buy. And while annual home price growth has slowed considerably, home prices this spring have held steady, and gains have largely mirrored trends seen before the pandemic. However, this is a significantly different housing market heading into the summer months.

With increased visibility into tariffs, diminishing concerns about an economic recession, and a higher number of homes for sale, the homebuying market could see improved optimism and increased activity going forward. But the course correction for the housing market will take some time and widespread concern about personal finances, job prospects, and potential tariff impacts continues to weigh on home prices.

Furthermore, consumer sensitivity to mortgage rates remains high, consistently hovering around the 7% mark. Rumors of potential homebuyers walking away from their offers in droves dominate the chatter in housing finance. The past Spring homebuying season, usually a boon for our business, was more of a bust. The next few months are likely to mirror this performance, as the Federal Reserve is not expected to cut rates anytime soon. 

According to April numbers from the National Association of Realtors, existing home sales are down 2% from a year ago; the slowest April sales pace since 2009, when the subprime mortgage meltdown dominated headlines. 

Here's the good news: Given the cyclical nature of the housing market, we are currently riding the trough, with nowhere to go but up. Indeed, home buyers are in a better position than they have been in the last few years given more inventory and less competition from other home buyers. Again, pending home sales are slowly inching up in 2025, with monthly pending sales for April are up 9% year-over-year, suggesting that pent-up home buyer demand is resulting in stronger activity than in 2023 and 2024.

Buyers have more negotiating power and are securing better deals than last year, with fewer homes selling above the asking price than in previous years – at 27% in April and compared to 31% last April, particularly in markets with higher inventory levels. Sellers are listing their properties at a higher rate than last year, suggesting that the improvements in for-sale inventories will continue.

Moreover, Cotality data indicates that a seasonal uptick in buyer competition is underway – more homes are selling over the asking price than during the winter, up from 18% in January, and with shorter days on market (23 days, down from 44 in February), both returning to pre-pandemic levels.

But the housing finance heat wave is only blowing through select markets, particularly markets in California, with 10%+ increase in home sales compared to 2024.  In contrast, Miami, Austin, Atlanta remain 20-30% below 2024 sales activity and are projected to remain weak.

Digging deeper, more home sales in the West are supported by a surge in for-sale inventories, which have increased by 60-70% year-over-year in Western markets. Inventories in the Northeast remain 60-80% below 2019 levels, which is holding back home sales activity but also continuing to put pressure on home prices.

However, despite slow activity and generally more inventory, and given the consumer overall sour sentiment towards the housing market, it is important to note that the number of markets where home prices are declining has not grown notably. About 14 of the 100 largest markets reported annual declines, up from 12 markets last month. Overall, the housing market is holding steady, but unfortunately this means we are in for a few more months of a bumpy ride.

HOME PRICE SNAPSHOT

• Hottest markets going into spring home buying season include Los Angeles, Orange County, Oxnard and San Jose, California; York, Montgomery County and Harrisburg, Pennsylvania; Durham and Winston, North Carolina, Boise City, Idaho. 
• Home prices picked up in early spring, consistent with seasonal trends, but are muted compared to pre-pandemic
• Home prices rose 2% YoY in April, continuing the trend of slower home price growth.
• Home Prices are forecasted to increase by 4.3% by April 2026
• Expecting below average home price growth in the next few years
• Prices remained flat since July when spring mortgage rate jump dampened home buying demand
• Markets surrounding New York City continue to see the highest appreciation rates (including Bridgeport, Newark, Lakewood, Hartford)
• Cape Coral and North Port in FL remain slowest appreciating markets and down 4%-7% YOY
• Markets furthest off the 2022 home price peaks are Austn, San Francisco Bay area, Idaho markets, while New York markets are up over 20% since mid 2022
• Home price cooling persists in Florida, San Francisco Bay area, Texas and areas in the Midwest that are being hit with insurance increases