Housing market shifts to favor buyers — but they’re not buying

Like much else about the U.S. economy, tariffs and broader uncertainty are weighing on home sales amid the industry’s crucial spring season.

In March, more than 375,000 homes were newly listed on the market — an increase of nearly 9% compared to the same time last year, according to Zillow Group Inc. (Nasdaq: ZG) research. But newly pending sales were flat compared to last year, despite slightly lower average mortgage rates in March 2025 compared to a year ago.

That’s despite several aspects of the market — including price cuts hitting their highest point in at least seven years — shifting to favor buyers.

Inventory rose to 1.15 million homes in March, an increase of 19% from last year and the most inventory for buyers in the month of March since 2020, according to Zillow. Inventory is now about 24% below 2018 and 2019 averages for the spring housing market.

During the four-week period that ended April 13, the median home-sale price was down from the same time a year ago in 10 of the 50 most populous U.S. metro areas, most especially in Texas and Florida, according to Redfin Corp. (NASDAQ: RDFN).

That’s because supply is outpacing demand in most places, especially in hot Sun Belt metros that’ve seen a lot of homebuilding and in-migration that’s cooled since its pandemic peak.

Homes today are also sitting on the market for longer. The typical home that went under contract in March had been listed for 47 days, according to Redfin. That’s the slowest pace tracked by Redfin since the Covid-19 pandemic.

These factors are adding up to a sluggish spring homebuying season, usually the start of the housing market’s most active time of year. And while the U.S. housing market is finally shifting to favor buyers, the underpinnings for that change aren’t necessarily in buyers’ favor.

“We really haven’t seen that big spring lift that’s in the traditional spring selling season, where sales spike up and you hit that peak,” said Sean Fergus, executive director of economic research at real estate data firm Zonda. “It feels like it’s a little bit in a holding pattern, with so much uncertainty and volatility in the market right now.”

Among new-home sales tracked by Zonda, 650,355 new homes sold in March at a seasonally adjusted annualized rate, a decline of 3.2% from February and down 11.5% from a year ago.

In its monthly survey, Zonda also found 32% of builders lowered their prices in March, 53% held prices flat and 15% raised prices. In February, 21% of builders lowered their prices from the month prior, 61% kept prices the same and 18% raised their prices.

The slowdown in new-home sales comes as builders are grappling with higher materials and labor costs because of White House tariff and immigration policy.

“Some of the markets are seeing softness in home prices, like Florida and Texas, and an increase in new home inventory sitting there,” said Brian Bernard, director of industrials equity research at Morningstar who tracks public homebuilders. “If the spring selling season is solid, it would work through that, but it feels like this season has been mixed, at best. If [builders] don’t have a great spring selling season, that’s more of a reason for pullback on starts.”

One positive from the amount of resale listings coming to market means the market is moving to a healthier inventory level than it’s had for some time, Fergus said. More options within the greater housing market is ultimately a good thing, he added.

And while new home sales have pulled back about 10% in the past year, according to Zonda, they’re still 4% higher than they were at this time in 2019, Fergus said.

“[More inventory] could have longer upside potential, especially if rates come down, attracting more potential buyers,” Fergus said, although he added Zonda is not expecting mortgage rates to come down significantly in the near term.

Mortgage rates, a key lever in the housing market, have also not moved much recently, with the 30-year fixed rate hitting an average of 6.83% last week, according to Freddie Mac data. Rates have largely been hovering in the mid- to high 6% to low 7% range for the past year.

Shift to a buyer’s market

The change happening in the housing market is somewhat nuanced. It’s not that buyer demand has recently or suddenly dropped off but, rather, demand from homebuyers isn’t growing while supply is.

Chen Zhao, head of economics research at Redfin, said homebuyer demand has actually been weakening since mid-2022, when interest rates began to rise. But since that time, and through 2024, supply remained low. Inventory in recent weeks and months has been picking up, through both new construction and resale homes.

“You might expect that, since 2023 or 2024, as people get more used to these high mortgage rates, demand would naturally start to increase,” Zhao said. “And demand would have to increase in some sense if you have more homeowners selling their homes — a lot of them have to buy another home if they’re move-up buyers. Demand is somehow not increasing.”

That’s because economic turmoil has sidelined buyers who now may be more reticent to make what’s likely the biggest investment of their lives by purchasing a house, both Zhao and Fergus said.

Cameron LaPoint, assistant professor of finance at the Yale School of Management whose research includes housing affordability, said in addition to consumer sentiment, major climate events, such as last fall’s hurricanes and the wildfires in Los Angeles in January, may also be cutting demand for housing. He added tariff’s ripple effects could make other monthly housing costs more expensive, too, such as homeowners insurance, which has already been soaring in recent years because of more severe weather risks from climate change.

Homes are now spending four additional days on the market compared with this time last year, according to Realtor.com. And more sellers are slashing their prices, with about 23% of the listings on Zillow receiving a price cut in March — the highest share for any March since at least 2018, according to Zillow.

While price cuts may be welcome in a housing market laden with affordability challenges, especially since the pandemic, many would-be buyers are pausing big purchases right now.

“Some are saying, if [there’s] a recession, mortgage rates will fall, that will bring back housing demand,” Zhao said. “If you’re in a recession with the [higher] tariffs, I’m not even sure mortgage rates will fall. That also doesn’t necessarily bring back demand, depending on the severity of the recession. If we assume mortgage rates stay where they are, you can have higher demand than what we’re seeing right now.”

For buyer demand to come back meaningfully, consumers need to have more certainty about the direction of the economy, she added.

Shared By Ashley Fahey – Managing Editor, National Content, Austin Business Journal