There's a record $700 billion of homes for sale in the US. Here's why the market is still frozen.
2025 was supposed to be a better year for the US housing market. But midway through, it's still stuck in low gear.
After the worst year for home sales since 1995, there are scant few signs of life in the market. Even a record amount of unsold inventory hasn't lured buyers in.
According to Redfin data released this month, sellers in the US are sitting on $700 billion of unsold housing stock, the highest dollar amount ever. Going by the number of homes for sale across the country, inventory is at a five-year high. Also, 44% of listings — or about $331 billion worth of homes for sale — have been on the market for over 60 days, the highest share since 2020.
So, where are all the homebuyers?
Rates and prices aren't budging
It's not the usual order of events. Often, with a deluge of inventory, prices edge down, but they're still creeping higher. In April, Redfin said prices rose 1.4% nationally even as the number of homes for sale jumped almost 17%.
"House hunters are only buying if they absolutely have to, and even serious buyers are backing out of contracts more than they used to," a Redfin real estate agent in Denver said.
Apart from prices, the other factor is mortgage rates. They're still too high for most buyers to stomach. The 30-year mortgage, which is tied to the 10-year Treasury yield, has barely budged this year. It's hovering just below 7%, and top forecasters expect the rate to end this year only slightly lower.
Goldman Sachs analysts last week said they see the rate on the most popular home loan dipping to 6.75% by year-end, from 6.9% currently.
After analysts initially predicted rates to cool this year as inflation ebbed and the Federal Reserve loosened monetary policy, forecasts have jumped again.
That's because the uncertain impact of Donald Trump's tariff policy has led to a repricing in the bond market and scrambled predictions for the Fed to cut rates. Markets now see the first cut of 2025 coming in September, according to the CME FedWatch Tool.
Economic anxiety
A gap between the "soft" and "hard" data points has been a big theme this year, with weak consumer sentiment and inflation expectations at odds with the backward-looking data that the Fed uses to inform policy.
The general feeling of anxiety stemming from things like tariffs, the path of inflation, and the overall economy is fueling the weak demand in the US housing market.
"In an instance like today, where markets are simply volatile, but not necessarily declining, that pure uncertainty also has a dampening effect on the housing market," Redfin's head of economic research, Chen Zhao, wrote in a separate report last month.
Zhao continued: "First, bond market volatility directly increases the difference between 30-year mortgage rates and 10-year treasury yields, pushing mortgage rates up."
Consumers and investors will get key updates on inflation and sentiment this week. May inflation data is due out on Wednesday, while the latest consumer sentiment reading will be published on Friday.
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