Overview: The Housing Market in July 2025
July marked the beginning of the third quarter of 2025, accompanied by cautious optimism about the economy. The latest GDP indicator suggests that economic activity remained robust in the previous quarter. Additionally, the 10-year Treasury yield reflects expectations for stronger growth in the upcoming months, although it also signals potential inflationary pressures. Indeed, inflation in July remained above the Federal Reserve's target of 2%.
In July, inventory levels reached their highest point since the 2020 lockdown, and wage growth outpaced the rise in home prices. With more inventory available and stable mortgage rates hovering around the mid-6% range, buyers were able to negotiate better prices. The increase in inventory improved affordability, which in turn led to increased sales activity. Nevertheless, leading indicators such as the Mortgage Purchase Index and Pending Home Sales suggest that the market will start to cool down as summer comes to an end next month.
The U.S. labor market is showing a deceleration in job creation. The market has consistently added jobs since May 2020, and despite the slower job additions in July compared to previous months, the unemployment rate has remained essentially unchanged since May 2024. The construction industry is also adapting, with housing starts increasing while building permit activity remains low. In the upcoming months, key indicators to watch include housing affordability and employment additions.
In July 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 it would maintain a range of 4.25%-4.50% for the rate until inflation decreases.
In July, a total of 73,000 jobs were added to the U.S. labor market, showing little change since April 2025. That month, job gains occurred in health care and social assistance, while the Federal government continued to lose jobs.
Total housing inventory reached 1.55 million units in July, up by 0.6% from June and by 15.7% from July 2024. July's unsold inventory was equivalent to 4.6 months’ supply, down from 4.7 months in June and up from 4 months in July 2024.
In July, privately-owned housing starts increased to a seasonally adjusted rate of 1.43 million. This increase was 5.2% above the revised June estimate and 12.9% above the July 2024 rate. There were 939,000 single-family starts in July, up by 2.8% from 913,000 in June.
Another measure of housing construction, building permits issued, decreased to 1.36 million in June. Permits were down by 2.8% from June and down by 5.7% from July 2024. Single-family building permits were at a rate of 870,000, 0.5% above the revised June estimate of 866,000.
