Home Sales Decline Sharply at Start of Spring
U.S. existing home sales experienced a significant downturn in March, falling by 5.9% from February to a seasonally adjusted annual rate of 4.02 million units. According to data from the National Association of Realtors (NAR), this represents not only the slowest pace of home sales for March since 2009 but also the largest monthly drop since November 2022, when sales declined by 6.7%. The current slump is being attributed to persistently high mortgage rates, pushing close to 7%, and steadily rising home prices, deterring potential buyers from entering the market.
Monthly sales also fell by 2.4% compared with March of the previous year. Although the volume of unsold homes rose 8.1% month-over-month to 1.33 million units, this increase in inventory has been insufficient to boost demand significantly. The median sales price for previously owned homes reached an all-time March high of $403,700, marking the 21st consecutive month of annual price increases, yet with the smallest annual increase since August of the previous year, at 2.7%.
“We’re seeing a substantial cooling at the start of what traditionally is a robust homebuying season,” noted Lawrence Yun, NAR’s chief economist. “The combination of high mortgage rates and rising home prices has created significant barriers for first-time homebuyers in particular.”
Economists emphasize that current market conditions—including uncertainties regarding economic policy and a less optimistic consumer outlook—are significantly influencing homebuyer decisions. Particularly in regions heavily impacted by affordability issues, buyers have become more hesitant, further slowing the housing market momentum.
Builders Adapt Amid Fluctuating Economic Conditions
While existing home sales faced significant declines, the new home market presented a slightly different picture, with sales rising 7.4% in March compared to the previous month. Year-over-year, new home sales registered a 6% increase. Analysts suggest this growth is partly due to builders focusing on smaller-sized, more affordable homes, as well as providing incentives to attract buyers.
Despite this promising uptick, new housing construction saw declines in March, with single-family housing starts falling by 14.2% from February, reflecting broader economic uncertainty and affordability pressures. The multifamily sector experienced a smaller reduction, decreasing by 3.5%. These drops have added pressure on builders, who already face rising costs of labor and materials attributed to tariff disputes, specifically those stemming from ongoing economic policies.
In contrast to declining activity nationally, certain regions showed positive momentum in new construction. The Midwest notably defied broader trends, surging 76.2% in housing starts for March. Conversely, markets in the South and West recorded sharp declines, illustrating varied regional impacts of economic concerns.
“High mortgage rates, elevated construction costs, and economic unpredictability continue affecting builder confidence negatively,” remarked Alicia Huey, chairperson for the National Association of Home Builders. “Builders are cautious, noting significant increases in material costs driven largely by tariffs.”
The NAHB/Wells Fargo Housing Market Index echoed these sentiments, reporting that 60% of builders experienced or anticipated increased materials costs due to tariffs. This environment is expected to influence new construction initiatives and housing availability through much of the year.
Broader Economic Factors Impacting Housing Market Stability
An important factor contributing to the overall housing market slowdown is the prevailing economic uncertainty, largely fueled by unpredictable tariff policies and broader economic conditions. Since 2022, when inflation rates began rising notably, buyers have increasingly faced affordability issues, with mortgage rates nearly doubling compared to earlier years.
Additionally, ongoing concerns surrounding economic stability, exacerbated by tariff-related price increases and potential threats of recession, have progressively dampened consumer sentiment. Recent reports indicate consumer confidence has declined, resulting in reduced spending and investment, further weakening housing market momentum.
Economists highlight broader implications of these conditions, suggesting continued housing market sluggishness may impact economic growth forecasts. The International Monetary Fund recently downgraded its projection for U.S. economic growth in 2025 to 1.8%, significantly below earlier forecasts of 2.7%. Experts predict that these factors, combined with heightened odds of recession feared by some analysts, will further restrain the market throughout the year.
“The housing market is often reflective of broader economic health,” said Mark Zandi, chief economist at Moody’s Analytics. “Persistent high mortgage rates, combined with economic policy uncertainties, significantly influence consumer confidence and spending, ultimately affecting overall economic stability.”
As the housing market continues to navigate these economic fluctuations, realtors, builders, and economists closely monitor developments, preparing for potential scenarios ranging from prolonged market stagnation to gradual recovery.