Overview: The Housing Market in September 2025
After a long period of sluggish sales, the housing market is showing signs of revival. In September, lower mortgage rates and improved affordability drove an increase in existing-home sales. Although home prices remain high, increased inventory has given buyers more options, enabling successful purchases. Current homeowners continue to build wealth, but many first-time home buyers are still unable to enter the market, and contract-signing activity showed no change during the month.
Overall, mortgage rates are expected to remain in the mid-6% range as we enter the last quarter of the year. The downturn in the 10-year Treasury yield, coupled with an additional short-term rate cut by the Federal Reserve, strongly suggests that rates will continue to fall. Nevertheless, consumer activity in the coming months will be shaped by developments in the labor market. Before the government shutdown (which began on October 1st), employment was higher than pre-pandemic levels, and consumer spending and confidence were high.
In a Federal Open Market Committee (FOMC) meeting on September 17, 2025, the Fed announced its plans to lower the target for the short-term interest rate by 0.25 percentage points to 4.0%-4.25%. As a reminder, the Committee can cut or increase the rate to help the economy achieve the goals of maximum employment and 2% inflation.
In August, a total of 22,000 jobs were added to the U.S. labor market. Overall, total nonfarm employment showed little change since April 2025. In August, job gains in healthcare were partially offset by losses in Federal government employment and in mining, quarrying, and oil and gas extraction.
Total housing inventory was at 1.55 million in September, up by 1.3% from August and by 14.0% from September of last year. Similar to the previous month, September's unsold inventory was equivalent to 4.6 months supply, up from 4.2 months in the same month last year. Current inventory is at a 5-year high but remains below pre-pandemic levels.
In July, privately-owned housing starts decreased to a seasonally adjusted rate of 1.31 million. This decrease was 8.5% below the revised July estimate and 6.0% below the revised August 2024 estimate. There were 890,000 single-family starts in August, down by 7.0%% from 957,000 in July.
Respectively, another measure of housing construction, building permits issued, decreased to 1.33 million in August. Permits were down 3.7% from July and 11.1% from August 2024. Single-family authorizations were at 856,000, 2.2% below the revised July rate of 875,000.
