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ERA Summit broker-owner Laura Garner entered 2025 with renewed confidence.
Laura Garner
December and January yielded increasing sales for her 40 associate brokers, setting the stage for a robust spring homebuying season. Garner expected sales to jump once again in mid-March; however, the month ended up being one of the worst on record for her team.
She immediately began diving into market stats to find the culprit behind the sudden dip: Was it the limited inventory? What about home prices? They were up 13 percent. Did tariffs scare buyers off? Maybe so, even though her brokers hadn’t flagged any issues.
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Amid her search for answers, the market suddenly rebounded, with Garner’s team winning more listings than they’ve had in two years.
“We’ve felt and seen a significant shift over the last couple of weeks. We have buyers that have been kind of, quote, unquote ‘on the fence’ but now seem to be ready to make that move,” she told Inman. “But, I don’t know. Is this just a seasonality? Is this just a temporary uptick? Is this something that’s going to be carried a little more permanently? I kind of feel like even though we had a slow start to the spring season, things might end well. Maybe I’m just being optimistic, but it’s what I’d like to see happen.”
Gavin Payne
RE/MAX Premier broker Mike Opyd and Better Homes and Gardens Real Estate Haven Properties broker-owner Gavin Payne described similar starts to the spring market, where buying and selling trends, at times, seem to be in contention with each other. Sellers are bullish about bringing new inventory to the market, while buyers, despite having more choice than they’ve had in two years, are holding back.
“We’re experiencing what I would describe as sort of a herky jerky start to the year,” Payne said. “We sort of have this surge, and then things will slow down, and then we’ll have a surge, and things will slow down.”
Although mortgage rates, tariffs, and affordability challenges undoubtedly play a role in buyers’ skittishness, Payne said how buyers feel about the statistics seems to be more powerful than the statistics themselves.
“It’s about uncertainty. Leading into the election last year, there was tremendous uncertainty, so things slowed down. After the election, there was a pickup. Then we have the inauguration, and things got unsettled again. This ebb and flow, I guess, is probably based upon people’s confidence more than anything else.”
Mortgage rates and tariff fears double-whammy homebuyers
National Apartment Association VP of Research and former Realtor.com Senior Economist George Ratiu said March’s paltry performance is a reflection of homebuyers’ waning confidence in the market, due to rising mortgage rates and uncertainty surrounding tariffs.
George Ratiu
“March is sort of the beginning of the spring homebuying season,” he said. “The expectations are that activity picks up. Sellers bring homes to market. Buyers return in larger numbers. So by and large, this decline in activity for March, for some people, signals a much softer market.”
Rates leading into March were promising, with the average 30-year fixed-rate mortgage dropping 11 basis points week over week to 6.76 percent during the week of Feb. 27. The drop brought mortgage rates to the lowest level in two months, stoking a cautious optimism among economists.
Mortgage trends remained positive into March, with average rates dropping again to 6.63 percent during the week ending March 6. The following weeks brought slight increases, with rates reaching back toward 6.7 percent by the week ending on March 20. The jump in average rates from 6.63 percent to 6.67 percent pushed total mortgage application volume down 6.2 percent — a foreshadowing of March’s 5.9 percent month-over-month drop in existing home sales.
Mortgage rates continued to increase in April, with averages reaching 6.81 percent during the week ending April 24. Although the difference between 6.63 percent and 6.81 percent seems small, it can translate to a considerable increase in monthly mortgage costs.
For example, if a homebuyer purchases a median-priced home with 20 percent down and a mortgage rate of 6 percent, their monthly mortgage would be $1,900, Ratiu said. However, a rate increase to 7 percent would boost the monthly mortgage to $2,100 — a $200 difference.
“That $200 a month is significant, considering that for many families and buyers, that could cut into their budget for other things,” he said. “Think about food, think about commuting expenses, gasoline and so on. So obviously, when we talk mortgage rates, even a few basis points can make the difference between being able to afford a home or not.”
A developing trade war magnifies that $200 difference, economists told Inman.
Orphe Divounguy
Trump announced a 10 percent reciprocal tariff on all imports on April 9, but promised to levy heftier tariffs on goods from Canada, Mexico, and China. The president placed a combined tariff of 145 percent on Chinese imports, and Chinese leader Xi Jinping responded with a 125 percent tariff on U.S. exports.
Zillow Chief Economist Dr. Orphe Divounguy said it’s unclear exactly how much the cost of goods, including those essential to housing, will go up in the coming months. The best-case scenario, he said, is that tariffs will yield “a one-time shock” in prices. The other, more difficult scenario is that tariffs yield multiple price increases as countries up the ante with a series of retaliatory policies.
“But ultimately, we have no idea how this is going to play out, which makes forecasting very difficult right now,” he said. “So in terms of the things that we do know for the housing market, specifically, if tariffs stay pronounced and if economic growth slows, [the Federal Reserve] might be able to step in to kind of rescue the U.S. economy from a potential economic contraction. And again, that’s going to depend on what they’re seeing. Right now, they’re waiting on the sidelines to see what happens.”
First-time buyers continue to get squeezed
Market headwinds continue to hit first-time homebuyers the hardest, with NAR reporting that first-time buyers accounted for 32 percent of sales in March — a share identical to the previous year.
Despite inventory levels rising on an 8.1 percent monthly basis and 19.8 percent on an annual basis to 1.33 million units at the end of March, median home prices still rose to a March all-time high of $403,700.
Jeff Tucker
“It’s a really tough market for first-time buyers, and there’s no getting around that,” Windermere Principal Economist Jeff Tucker said. “At least for existing homeowners, they have benefited from the recent rise in home prices that, especially if they owned back in 2020 or 2021, then that rise in the value of their current home should help give them a lot of home equity to put toward their next one. But first-time home buyers don’t have that advantage.”
Realtor.com Chief Economist Danielle Hale said the portal’s latest survey data shows a competitive landscape for first-time homebuyers, as 81 percent of sellers nationwide expect to get at or above their asking price. Homebuyers in the Northeast and Midwest will face the stiffest competition this spring, Hale said, thanks to for-sale inventory in those regions trending behind availability in the South and West.
“Sellers, interestingly enough, are quite optimistic,” she said. “I think in many markets, there’s still the balance of the market is tilted towards sellers nationwide. The months of supply [at the current sales pace] is four, which is what we consider the start of a balanced market. In affordable markets in the Northeast and the Midwest, we see more market hotness, so sellers are likely to be in an even better position there.”
But for those who decide to stick it out, economists said there’s more wiggle room to negotiate than last spring.
Divounguy said Zillow data showed that 24 percent of sellers cut their asking price in March, and Ratiu said Realtor.com’s data showed that 18 percent of sellers cut their asking price — both of which represent a nine-year high for March.
Mike Opyd
“What that tells me is that the reality in which properties linger on the market longer, even though there’s demand, buyers are obviously being more careful,” Ratiu said. “There’s a normal and welcome tension between what sellers want and what buyers are willing to pay.”
Opyd, who works in Chicago, echoed the economists’ findings. He said homesellers still have the upper hand; however, they’re more flexible with negotiating sales prices and occasionally offering other incentives, such as closing cost credits.
“A couple of years ago, when something hits the market, all of a sudden they got 30 offers, and you’d have to give your firstborn just to have a shot,” he said. “I haven’t quite seen that level of craziness this year, but I’m still seeing multiple offers, so I still think there’s that interest level there.”
“The offer I just got accepted two days ago was about $10,000 under list price, and I got a closing cost credit,” he added. “So, I’ve seen flexibility in certain areas.”
The silver lining: new-home sales
While existing-home sales flopped in March, new residential sales soared.
New-home sales rose 6 percent year over year to a seasonally adjusted annual rate of 724,000, exceeding analysts’ expectations of 680,000. The new-home median sales price dropped 7.5 percent year over year to $403,600, slimming the gap between the median price of an existing home and a new home to $100. Relatively affordable prices matched with homebuilder incentives mean the new-home market is ripe with opportunity.
Danielle Hale
“Construction activity is different in every region, so some buyers have more opportunities to consider new construction than other buyers. Based on our research, homebuyers who consider new construction are more likely to encounter potential incentives like mortgage rate buy-downs,” Hale said. “And depending on the region that you’re looking in, we see builders trying to build smaller homes to address the more affordable portion of the market. So I think for homeshoppers who might not have considered new construction, it can be a more viable alternative.”
While tariff fears are hovering over the existing-home market like a wall cloud, homebuilders currently see the burgeoning trade war more like cirrus clouds, barely making a mark in a sunny sky.
“If you listen to the National Association of Home Builders, they’re worried about the potential impact of tariffs in terms of building materials and components. But then you listen to builders’ calls, and you realize that, actually, maybe some of those estimates [about the impact of tariffs] might have been somewhat on the higher end,” Divounguy said. “As long as there’s demand for housing, builders are going to show up.”
Ratiu said recent lumber futures, which are the sales contracts for two-by-fours, offer some reassurance that new-home prices won’t balloon the way they did under Biden’s 2021 tariff policy, when booming lumber prices tacked $36,000 onto the cost of a new home. Ratiu said lumber futures are around $570 per 100 linear yards, which is $170 higher than the historical average of $400, but far less than the $1,300 per 100 linear yards that sidetracked the new home market earlier in the pandemic.
“I think for construction companies, the last year or so, even with prices still rising, has been fairly positive,” he said. “A lot of new homes that are on the market today are priced for the construction costs of about six to eight months ago. When you think about that, the process that it takes to get a new house built is generally a multi-month process. So if anything, we might not see the new home prices reflecting any higher tariffs for quite a few months.”
It all comes down to managing confidence
Ruben Gonzalez
As for what the remaining spring season will look like, the economists Inman spoke to said it’s nearly impossible to predict whether sales will meaningfully improve. Tariff fears, alongside mortgage rates, will be the deciding factor in how homebuyers and homesellers move through the market.
“I think the continued theme of uncertainty will drive the market,” Keller Williams Chief Economist Ruben Gonzalez said. “We’re going to have to continue to monitor the pattern of mortgage rates. I think we have some optimism that as policy uncertainty, hopefully, begins to dissipate, we’ll see things start to pick up in the summer months.”
Garner, Payne and Opyd said they’re cautiously optimistic about the spring and the impending summer market. While they expect home sales to largely mirror 2024, the trio said there’s a unique opportunity to build consumers’ confidence by offering them timely, hyper-local data that provides nuance to national trends.
“There’s a lot of information and misinformation out there about what’s happening in the market,” Payne said. “You know, people are talking about bubbles bursting and all sorts of catastrophic things happening. I tell my agents those are the things that we need to combat by leading the conversation.”
“We can’t really drive people to market,” he added. “But we can give them the most accurate information we have about what’s happening, so they can make an educated decision when they’re ready.”
