Overview: The Housing Market in April 2025
The second quarter of 2025 started with some good news about the economy. Despite the Federal Reserve’s forecast for faster consumer price growth and slower economic growth, the April inflation rate moved closer to the Fed’s target rate of 2%. The primary component keeping inflation high is shelter (housing) costs, which comprise one-third of the budget. Getting shelter costs under control is the key to calming overall inflation and decreasing mortgage rates.
From an economic perspective, the labor market remains strong. The combination of job additions, an unchanged unemployment rate, and consistent wage growth outpacing inflation is providing stable income to sustain consumer spending. However, economic uncertainty is causing home buyers to hesitate.
Both existing-home sales and pending sales slowed down in April. While mortgage rates remained high, buyers’ negotiating power increased due to improved inventory. The market indicators are signaling that activity will improve in the summer months. The MBA Index increased, suggesting that demand and contract activity may rise in the upcoming weeks. Moreover, rising listings and housing starts are pointing to an improvement in the number of homes available on the market. Nevertheless, the consistent issuance of building permits and construction activity is necessary for supply to match demand.
In April 2025, the upper limit of the Federal Funds Rate remained at 4.5%. Although the Federal Reserve began cutting the short-term rate in September of 2024, inflation continued to rise above its target. Consequently, the Fed announced that it would maintain a rate range of 4.25%-4.50% until inflation decreases.
In April, 177,000 jobs were added to the U.S. labor market, roughly in line with the average monthly gain of 152,000 over the prior 12 months. Jobs continue to trend upward in healthcare, transportation and warehousing, financial activities, and social assistance. Within the Federal government, 9,000 jobs were reduced, while the real estate industry added 10,000 jobs.
The current unsold inventory is equivalent to a 4.4-month supply at the current sales pace, up from 4.0 months in March and 3.5 months in April 2024. Historically, a 6-month supply is associated with moderate price increases.
In April, privately owned housing starts increased to a seasonally adjusted annual rate of 1.36 million. This increase is 1.6% above the revised March 2025 estimate but 1.7% below the April 2024 rate. Single-family housing starts were at a rate of 972,000 that month, up 2.1% from the previous month.
Respectively, another measure of housing construction, building permits issued, decreased to 1.42 million in March. The decrease was 4.7% below the revised March 2025 estimate and 3.2 below the April 2024 rate. Single-family permits were at a rate of 922,000, down 5.1% from March.
