Why the Spring 2025 Buy Season is Slower than Expected

Economic uncertainty, buyer hesitancy, and affordability concerns were among the reasons the spring selling season was softer than expected.

A series of economic data released in the past week suggests reasons behind the softer market. As mortgage rates remain close to 7%, many would-be buyers are remaining on the sideline, translating to fewer mortgage applications and fewer pending sales in the resale market. As a result, the number of sellers outnumbers buyers by nearly 500,000. The imbalance between sellers and buyers and the shift to a buyer’s market suggests prospective buyers may begin to see listing price relief even as rates remain elevated.

Mortgage Rates Remain Near 7%

The 30-year fixed-rate mortgage (FRM) remained below 7% for the week of May 29, but mortgage applications declined for the second consecutive week. According to the Freddie Mac Primary Mortgage Market Survey, the 30-year FRM averaged 6.89% for the week of May 29, up slightly from 6.86% a week ago.

At the same time, the Mortgage Bankers Association (MBA) reported mortgage applications decrease 1.2% from a week earlier as buyers remain deterred by mortgage rates that continue to hover around 7%.

“Mortgage rates reached its highest level since January, following higher Treasury yields,” says Joel Kan, the vice president and deputy chief economist of the MBA. “As a result of these higher rates, application activity decreased, driven by a 7% decline in refinance applications.”

Conventional refinances during the week ending May 23 decreased 6% and VA refinances declined 16%.

Due to elevated rates, the MBA reported home buyer affordability declined during the month of April. The national median payment applied for by purchase applicants in the month increased to $2,186 from $2,173 in the previous month.

“Home buyer affordability conditions declined somewhat in April and remain elevated overall. Economic uncertainty and high mortgage rates continue to weigh on prospective buyers’ decisions on whether to enter the housing market,” says Edward Seiler, MBA’s associated vice president of housing economics and executive director of the Research Institute of Housing America. “Even with the increase in mortgage rates over the month, the median purchase application loan amount decreased slightly to $328,932, indicating that home prices are moderating. Slower home price growth, and the overall trend of more inventory, are positives fro housing this summer.”

Higher Rates, Fewer Sales

The existing home market remained soft, with pending home sales declining 6.4% on a national basis in April and in each of the four U.S. census regions.

According to the National Association Realtors (NAR), the Pending Home Sales Index (PHSI)—a forward-looking indicator of home sales based on contract signings—fell to 71.3 in April. On a year-over-year basis, pending transactions fell by 2.5%. An index reading of 100 is equal to the level of contract activity in 2001.

“At this critical stage of the housing market, it is all about mortgage rates,” says NAR chief economist Lawrence Yun. “Despite an increase in housing inventory, we are not seeing higher home sales. Lower mortgage rates are essential to bring home buyers back into the housing market.”

Shift to Buyer’s Market and Potential Price Relief

Data from Redfin indicates there is a significant imbalance of buyers and sellers in the U.S. housing market, which will likely push home prices lower in 2025.

Redfin estimates there are 33.7%—or 490,041—more sellers than buyers in the market, the largest disparity since tracking began in 2013. A year ago, sellers outnumbered buyers by just 6.5% and two years ago, buyers outnumbered sellers.

The larger number of sellers than buyers is the primary reason Redfin projects home prices will drop 1% on a year-over-year basis by the end of 2025. In a buyer’s market—like the current housing market—home prices can fall because buyers have negotiating power.

There are several reasons sellers outnumber buyers in the current market, including high home prices and mortgage rates, economic uncertainty, and the continued impact of the mortgage rate lock-in effect.

“The balance of power in the U.S. housing market has shifted toward buyers, but a lot of sellers have yet to see or accept the writing on the wall. Many are still holding out hope that their home is the exception and will fetch top dollar,” says Redfin senior economist Asad Khan.” But as sellers see their homes sit longer on the market and notice fewer buyers coming through on tour, more of them will realize that the market has adjusted and reset their expectations accordingly.”