New Home Sales Surge
The housing market is facing significant headwinds.
April 23, 2025
March new home sales, which are recorded at the contract signing, jumped 7.4% from February levels. Sales reached 724,000, the highest since September. The three-month moving average has barely budged from a 684,000 level since the start of the year. The South and the Midwest drove the gains.
Inventory of newly built homes fell slightly to 8.3 months of supply at the current sales pace. The market needs about six months to match demand and supply. The larger publicly traded builders are sitting on much lower levels of supply since they are better equipped to offer price discounts and mortgage rate buydowns. According to the National Association of Home Builders (NAHB), about 59% of builders used some sort of incentives in March and about 29% cut prices.
Supply chain pressures and rising costs from tariffs are adding insult to injury to those builders who have already felt their margins squeezed. Consolidations are expected. In April, 60% of builders reported their suppliers announcing price increases or already increasing prices for inputs due to tariffs. NAHB estimates the average increased cost to build a single-family home will go up by $10,900. Rising uncertainty and expectations of sluggish demand are putting projects on ice.
Mortgage rates fell slightly in March but rebounded to nearly 7% in mid-April. The fall in rates boosted refinancing activity, although some sidelined buyers were able to enter the market. Mortgage applications to purchase a home were 10% higher than a year ago at the end of March and 25% higher than a year ago during the first week of April. This will help spur some activity at the start of the traditional home buying season, but overall home sales are expected to be weak this quarter.
The rise in economic uncertainty and souring consumer attitudes point to fewer big-ticket purchases, like a home. Homebuyers will be reluctant to make such a big purchase decision when their own financial situations are uncertain. The latest Fannie Mae homebuyer sentiment survey showed that the share of respondents who think their personal financial situations will worsen over the next 12 months surged to 27% in March, the highest since July 2022, when the Federal Reserve was just starting its rate-hiking regime. That tracks with other consumer attitude surveys, which show concern about future economic conditions
With more tariff announcements expected on lumber, copper, semiconductors and other inputs, builders will continue to face margin pressures.
Yelena Maleyev
乐鱼（Leyu）体育官网 Senior Economist
Bottom line
The housing market is facing significant headwinds from both muted demand due to households鈥� uncertainty and pressures on supply due to rising costs from tariffs. Significantly warmer weather and a fall in mortgage rates in March were not enough to spur the type of sales we would expect to see at the start of Spring. With more tariff announcements expected on lumber, copper, semiconductors and other inputs, builders will continue to face margin pressures.聽
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