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May 23, 2025

New home sales soared 10.9% in April after March sales were revised lower. The pace of sales was the highest since February 2022, when mortgage rates were about half the level they are today. On a three-month-moving average basis, sales were the highest since September 2024. Lower mortgage rates at the start of the month helped bring in sidelined buyers, but the euphoria was short-lived as trade uncertainty and financial market volatility began to weigh on consumers.

All regions except the Northeast recorded higher sales in the month. Builders have been offering price cuts and mortgage rate buydowns to help lure in sidelined buyers. Incentives work; inventory of homes available for sale was down to 8.1 months� supply at the current sales pace. About six months are needed to clear the market. Builders have been having a hard time moving inventory in a high mortgage rate environment. Add in rising economic uncertainty and souring consumer sentiment, and many builders have had to take a bigger hit to margins to make sales. Nearly half of all homes sold in the month were priced under $400,000, a much higher share than the past few years.

Separately, existing home sales, which make up the bulk of the housing market but are a lagging indicator due to them being recorded at the contract closing, slid 0.5% in April. Inventory levels shot up to 1.45 million in the month, reflecting a 4.4-month supply at the current sales pace. This is good news compared to last year, when inventory was only at a 3.5-month supply. Prices are still rising, while the most in-demand markets are seeing more cash sales and shorter sales times.

Mortgage rates ticked up again in mid-May, but there was a short period in early March to middle of April when mortgage rates were at their lowest level in three months. This allowed some buyers to jump in, but not for long. Since existing housing data reflects the contracts that were signed a few months prior, we could see a small bump up in sales in May. However, what is traditionally seen as the busiest time of year for the housing market is proving to be quite the opposite.

Consumer sentiment toward the housing market remains lackluster. While some buyers are entering the market due to improved inventory levels and life changes, economic uncertainty and high home prices continue to constrain activity. Add in rising costs of insurance and taxes, and affordability is eroded further. The Fannie Mae Home Purchase Sentiment Index reflects these concerns about affordability and job security; 77% of respondents think this is a bad time to buy a home while a quarter are concerned about losing their job over the next year.