In March 2025, the U.S. housing market experienced a significant slowdown, with existing home sales dropping to their lowest March pace since 2009.

This decline, driven by high mortgage rates, rising prices, and economic uncertainty, has raised concerns about affordability and the broader economic outlook.

According to the National Association of Realtors (NAR), existing home sales fell 5.9% in March 2025 to a seasonally adjusted annual rate of 4.02 million units, down from the previous month and 2.4% lower than March 2024.

Economists polled by Reuters had anticipated a slightly less severe decline to 4.13 million units, underscoring the unexpected weakness in the market.

The sales figures reflect contracts likely signed in January and February, when the average 30-year fixed mortgage rate hovered near 7%, a level that has deterred many prospective buyers.

CNN noted that the Northeast was the only region to see an increase in sales, marking its first uptick since November 2023, while sales fell across the South, Midwest, and West.

This regional disparity highlights the uneven impact of economic pressures on the housing market.

The persistent high mortgage rates, which climbed to a two-month high of 6.83% in early April, have compounded affordability challenges, particularly for first-time buyers.

Despite the slowdown in sales, home prices continued to climb, exacerbating affordability issues.

The median price of an existing home sold in March reached $403,700, an all-time high for the month and a 2.7% increase from the previous year.

However, this annual price gain was the smallest since August, signaling a potential cooling in price growth as inventory rises and sales slow.

CNBC reported that the total inventory of unsold homes grew to 1.33 million units by the end of March, an 8.1% increase from February and equivalent to a 4-month supply at the current sales pace.

While this is an improvement from the 3.2-month supply a year ago, it remains below the 6-month threshold considered indicative of a balanced market.

Reuters emphasized that a 4-to-7-month supply is viewed as a healthy balance between supply and demand.

The current 4-month supply, while lean, suggests that the market is not oversaturated, which may prevent a sharp decline in prices akin to the 2007-2009 housing crisis.

Properties stayed on the market for an average of 36 days in March, up from 33 days a year earlier, indicating a slower turnover as buyers hesitate.

The housing market’s struggles are not solely due to high mortgage rates and prices. Growing economic uncertainty, particularly surrounding President Donald Trump’s tariff policies, has dampened consumer confidence and demand.

Reuters highlighted concerns about tariffs on imports, including lumber, which have increased construction costs and further strained affordability.

The National Association of Home Builders (NAHB) reported that tariffs add an estimated $9,200 to the cost of a typical home, a burden that builders pass on to buyers. This has contributed to a drop in homebuilder sentiment to a seven-month low in March, as reported by Reuters.

CNBC also pointed to broader economic concerns, noting that fears of a slowdown due to tariffs and other policy shifts have led to a pullback in buyer activity.

Despite the increase in available listings, which rose nearly 20% from March 2024, the market remains tilted in favor of sellers due to the still-tight supply relative to demand.

The composition of buyers in March 2025 provides additional insight into market dynamics. First-time buyers accounted for 32% of sales, unchanged from a year ago but well below the 40% share economists and realtors consider necessary for a robust housing market.

All-cash sales made up 26% of transactions, down slightly from 28% a year earlier, while distressed sales, including foreclosures, rose to 3% from 2%.

These figures, reported by Reuters, suggest that while cash buyers and investors remain active, their influence is waning as affordability constraints limit participation from entry-level buyers.

Posts on X echoed the sluggish market sentiment, with reports of tens of thousands of pending home sales falling through in March due to economic uncertainty.

This aligns with Redfin’s analysis, which noted that aspiring buyers are increasingly hesitant to commit to major investments amid shifting economic conditions.

While existing home sales faltered, new home sales showed surprising resilience. Reuters reported that new single-family home sales jumped 7.4% in March to a seasonally adjusted annual rate of 724,000 units, the highest since September 2024.

This surge, driven by a dip in mortgage rates to 6.65% and builder incentives, was particularly pronounced in the South, where sales reached a nearly four-year high.

However, the median new home price dropped 7.5% to $403,600, reflecting builders’ efforts to reduce inventory through discounts and smaller floorplans. The inventory of new homes rose to 503,000 units, the highest since 2007, translating to an 8.3-month supply.

This divergence between existing and new home sales underscores the complex dynamics at play. Builders are responding to affordability challenges with incentives, while the existing home market remains constrained by high prices and borrowing costs.