Housing market update spells more trouble | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Let’s say it like it is

The housing market of late has been far from dazzling, and everyone’s feeling the pinch.

💵💰Don’t miss the move: Subscribe to TheStreet’s free daily newsletter💰💵

New home buyers are hitting pause, with builders stuck with unsold inventory, as lenders continue clamping down.

What looked like a robust housing market not too long ago now feels frozen.

Buyers are stepping aside, builders are trying to unload homes, and no one’s sure how ugly this dip might get.

High mortgage rates, inflated home prices, and tariff drama have collectively led the new-home market into no-man’s land.

Affordability’s taking a hit, and buyers continue being circumspect.

Moreover, given the most recent development, things could take a while to improve.

Affordability crunch stalls housing market rebound

ANDREW CABALLERO-REYNOLDS/Getty Images

The housing hangover

Since Covid, the U.S. housing market’s been on a rollercoaster ride.

The first was a massive price surge, followed by a Fed-fueled pullback and now a choppy cooldown heading into mid-2025.

For perspective, home prices jumped about 43% from early 2020 to June 2022.

That momentum had everything to do with rock-bottom mortgage rates, stimulus-fueled savings, and the powerful remote-work boom.

However, the market started to cool fast once the Fed kicked off its aggressive rate hikes in early 2022.

By mid-2023, 30-year mortgage rates surged from just under 3% in early 2021 to over 7%.

Price growth hit the brakes, too.

By late 2024, some cities were seeing significant year-over-year declines, and by April of this year, national gains were down to just 2.7%.

Yet affordability is getting squeezed hard.

Home prices continue outpacing wage growth, and with borrowing costs stuck high, a lot of current homeowners are staying put.

At the same time, tariffs are messing with material costs, crippling supply.

Inventory levels still feel tight as smart money dumps rental homes after nearly two years of falling rents.

Looking ahead, the majority of analysts see either sluggish growth or slight price drops through the rest of 2025.

J.P. Morgan expects sub-3% gains, while Redfin sees prices slipping about 1% by year-end.

More on the housing market:

The real relief for buyers depends on the Fed cutting rates and boosting new-home construction to ease the supply crunch.

Sharp May slowdown signals deeper trouble for housing market

Sales of new single-family homes nosedived again in May, dropping to a 623,000 annual pace.

That’s down roughly 13.7% from April and 6.3% lower compared to a year ago, highlighting significant market duress.

Meanwhile, inventories of new homes continue piling up while revenues cool off.

By the close of May, builders had just 507,000 new homes on the market, up 1.4% from April and 8.1% from last year.

That’s close to 10 months’ worth of supply, pointing to substantial oversupply.

Affordability remains the biggest roadblock

The National Association of Realtors’ chief economist, Lawrence Yun, says that median home prices have jumped over 50% since 2019, but wages haven’t kept up.

Layer that up with a 6.8% average mortgage rate and it’s no surprise people are backing off

Moreover, it’s not homebuilders feeling the pinch.

The weakened housing market has hit everyone from mortgage lenders to furniture stores. If this slump sticks around, it could prove to be a drag on consumer confidence and slow down the broader economy.

Naturally, things are unlikely to get much better unless mortgage rates drop or prices take a meaningful dip.

Builders might need to cut prices and throw in more incentives. It seems like high inventory and soft demand will stay for a while.