The US residential housing market has been frozen for the last couple of years as a variety of competing forces have resulted in limited transaction activity. For much of the country, the story has been the same: sky-high home prices, low demand, and limited inventory. As these trends continue into 2025, many are wondering if spring, the start of peak real estate season, might finally be the point when the market begins to thaw.
While a great deal of uncertainty remains, we’ll keep you informed with a summary of spring 2025 residential housing news to help you better navigate the market. Here are some things to know:
Buyers Are Still Facing Affordability Challenges
While some industry experts were predicting a decline in home prices, things haven’t quite panned out that way. National home prices are up 2.6% year over year, and they’re continuing to rise. While frozen, the market still favors sellers, which is continuing to drive up the cost of homes.
Mortgage rates are also creating affordability barriers in the market. As of April 2025, the average 30-year fixed rate mortgage was about 6.64%. While many expect mortgage rates to fall in 2025, this is somewhat contingent on the Fed winning its war against inflation.
The combination of high home prices and mortgage rates is continuing to create an uphill battle for many consumers, especially first-time homebuyers. Many buyers have been sitting on the sidelines for a couple of years now, so the good news is there should be a significant amount of pent up demand that may be unleashed as rates begin to drop.
Tariffs Could Impact Home Prices
With a nationwide housing shortage and low inventory, new home construction continues to be critical for the market. The US is currently facing a supply gap of about 4 million homes, which could take up to 7 years to resolve with the current construction pace.
Some industry experts are predicting that the cost of new home construction could rise following the sweeping new tariffs announced on April 2. The National Association of Home Builders (NAHB) projects that approximately 10% of building materials used in residential construction are imported, with a significant amount coming from Canada and Mexico. Given the mortgage rate environment and high home prices, even a modest increase in new construction home prices could be a major setback for consumers.
Tariffs could also impact mortgage rates, especially if they lead to short-term elevated inflation. This could cause the Fed to pause rate cuts in 2025 or even reverse its interest rate policy. While the Fed doesn’t set mortgage rates directly, the Federal Funds Rate influences them, so many industry experts are closely monitoring the Fed’s decisions.
While the long-term impact of the new tariffs is unknown, the short-term impact could mean additional market turbulence in 2025.
Inventory Challenges Persist
Existing home listings remain very low compared to a typical early spring season. While an undersupply of homes is part of the issue, the larger factor is that interest rates are causing people to stay put. Millions of homeowners have been locked into ultra-low interest rates over the last few years, and most are reluctant to give them up in a high rate environment. As a result, there are far more buyers in the market than sellers, which is leading to fewer listings.
A Lack Of Residential Infrastructure is Slowing New Home Construction
New home construction is one of the most effective ways to offset the current inventory challenges, but many homebuilders across the country are struggling to keep up with demand. While there is plenty of land available, a lack of residential infrastructure is often the primary cause for a slow supply chain.
Homebuilders are well-equipped to produce high-quality homes at scale, but when acquiring land without utilities, roads, and lots, building the necessary infrastructure can be expensive and time-consuming. As a result, some of the nation’s top homebuilders are partnering with infrastructure developers to accelerate new home construction. For example, Jobalia Development Group supplies some of the nation’s largest homebuilders with ready-to-build lots in Florida, which is both speeding up construction and making development more profitable.
While the impact of tariffs and Washington’s upcoming housing policy are major unknowns, the same market forces may continue to create headwinds in 2025. In the meantime, it will be more important than ever for homebuilders to deliver new homes at scale.
