Typically, home-sale activity should be perking up right now because families — especially families with children — like to move in the spring and summer.
They want time to get children enrolled in schools. They need to learn where to shop and reestablish themselves in new neighborhoods, and they must adjust, if necessary, to changes in commuting times.
The economy would offer confidence to home owners debating whether to assume the risks of buying.
Home prices would be sort of stable.
In fact, 2025 has been a bit of a bummer. Rates on 30-year mortgages have mostly gone up. Prices are higher, and the economy was body-slammed by President Trump's tariff plan in April.
Two monthly reports this week will offer a picture of the current situation: the National Association of Realtors' report on April existing-home sales, due Thursday, and the Commerce Department's report on new-home sales in April, due Friday.
The existing home-sales report is expected to show sales running at a 4.12 million-unit annual rate, up slightly from 4 million in March. But it would be off nearly 40% from the October 2020 recent peak sales rate of 6.85 million units.
The new-home sales projection is an annualized 700,000 rate, down from a 724,000 sales-rate in March. But that rate would be off some 60% from about 1 million new homes sold in 2020.
Why buyers are so frustrated
The biggest conundrum home buyers face in 2025 is that home prices have climbed massively in the last 20 years. Incomes have not.
The tax of building a down payment to buy a home is difficult at best for first-time buyers. And many would-be buyers are reluctant to saddle themselves with huge mortgage expenses every month with no money left over.
A group of signs advertising the new homes in Minnesota.UCG/Getty Images
The terrible math of the problem
Let's say homeowners bought a house 25 years ago for $300,000, financing with a 15% down payment (or $45,000) and an 8% mortgage. The monthly payment at the time might have been $1,871, plus taxes, insurance and the like.
Now, the owners want to sell, and the value of the home is $600,000. A 15% down payment would be $90,000 and, at current mortgage rates (about 6.9%), the monthly principal and interest payment would be roughly $3,560, plus, of course, plus taxes, insurance and the like.
The first-time buyers' first reactions might be to start crying.
Without first-time buyers, however, move-up buyers can't move on to their next homes.
The situation is affecting the entire economy. It's one of those things you don't think about. But a home sale affects appliance dealers and manufacturers, hamburger joints, dry cleaners, furniture dealers, paint manufacturers, building-supply retailers, real-estate brokers, lawyers, title companies and, of course, lenders.
The immediate spending a buyer might do on his house or apartment after a sale closes might total 7% to 10% of the sales price. If refurnishing the house, maybe the total hits 30% or more of the home's price.
If you're doing a big renovation, the numbers explode.
Small wonder the National Association of Home Builders Housing Market Index for May showed:
Builder expectations dropped 8 points to 37. Above 50 says the builders are optimistic.
Sales expectations for the year have fallen.
Traffic of prospective buyers has tumbled.
About 34% of builders reported cutting prices, up from 29% in the April report. The average price cut: 5%.
Builders with the financial muscle (that is, big builders like Pulte (PHM) and D.R. Horton (DHI) ) have used incentives, usually subsidizing mortgage payments, for the first few years to make sales. The cost of the incentives hit their profits.
The demand/need to get the country affordably housed is much bigger than that.
The National Association of Realtors, admittedly full-on in favor of homeownership, estimates the entire country needs 367,000 more homes available for sale at no more than $170,000, 416,000 more homes priced $255,000 or less and 364,000 homes priced under $340,000.
How you get all those homes requires land, water, utilities, roads, cash, enlightened land-use officials and good financial training for buyers and sellers.
There's one other issue. People buy homes because they have jobs. But where the jobs are is where markets are most tight. The tightest markets include California, Massachusetts, Hawaii, Montana and Idaho.
Logic suggests, then, that jobs need to move out to housing becomes more affordable.
This past Friday's report on housing starts and building permits showed fewer single-family homes are getting started, but multi-family complexes are up a little.
That's why the two reports coming this week matter. So does the context.
The Federal Reserve boosted rates 11 times starting in 2022 to combat inflation pressures that erupted after the 2020 Covid-19 pandemic.
Though the Fed cut its key federal funds rate from 5.25%-to-5.5% to 4.25%-to-4.5% in three cuts in late 2024, the residual effects of those increases are still at work on the economy and on the housing market.
Publicly-traded home builders like Lennar (LEN) , KB Home KBH, Pulte and D.R. Horton have seen their stocks fall by roughly 30% since mid-September 2024 when the Fed announced its first interest-rate cut.
Never forget the bond market
But the stocks didn't fall because of the Fed directly. Rather, bond yields started rising, mostly because of how bond investors look at the U.S. financial position — large and growing deficits.
The 10-year Treasury yield, a key determinant of mortgage rates, has risen from 3.62% in September 2024 to 4.48% as of Friday.
Another way to look at the bond market: Track the iShares 20+ Year Treasury Bond ETF (TLT) . Its value rises as interest rates fall and fall when rates go up. The ETF's price fallen 14.8% since September.
Appliance giant Whirlpool (WHR) has seen its shares fall 38% from their January high of $133.14. Home-improvement giant Home Depot (HD) , which reports first-quarter earnings before Tuesday's open, has seen its shares fall 10.4% from its January high.
Online real-estate broker Redfin (RDFN) agreed to sell out to Rocket Companies (RKT) for $1.75 billion. Afterward, Redfin CEO Glenn Kelman said he agreed to sell the company the company was facing serious stress. "We would have been stripped for parts," he told The Puget Sound Business Journal.
Rocket shares have suffered, too — down 36% from their August 2024 high, reached as it had become clear the Federal Reserve was ready to cut interest rates.
