Mary's Market Watch - Q1 2025

As the second Trump administration concludes its first 100 days, the US economy is quickly adapting to the President’s major policy changes, which are naturally affecting the real estate market.

The uncertainty surrounding the international trade policy has in part cooled the US housing market. Home sales have become more sluggish amidst high mortgage rates, greater inventory and higher home prices. Housing affordability remains a concern.

In late 2024 and early 2025, the forecast for the 2025 housing market was upbeat, especially since it was anticipated that the high mortgage rates would improve. However, there is now a great deal of uncertainty in the housing market, as is the case with most industries.

If mortgage rates were to ease and price growth were to moderate, these developments would create greater affordability for borrowers and thus spur more home purchases. Conversely, if mortgage rates were to increase due to higher inflation with the implementation of more tariffs, this would, in turn, increase cost overruns and other costs for builders in particular, and inflate the cost of real estate in general.

Having said this, I believe uncertainty equates with unpredictability.

A Deep Dive into the Data

U.S. Real Estate Market

According to the National Association of REALTORS® (NAR), March saw existing-home sales decline by 5.9%, while the median home price exceeded $400,000 for the first time and inventory climbed by 8.1%.

• Mortgage Rate. The mortgage rates started to drift lower. As of April 29, 2025, the rate for a 30-year fixed mortgage was 6.81%. While there are daily fluctuations in the rate and the movement in the data is slow, overall mortgage rates appear to be moving in the right direction. (Source: Graham, Matthew, "Friendly, Stable Trend Continues For Mortgage Rates," Mortgage News Daily, April 29, 2025.)

• Home Sales, Price and Inventory. The median existing-home price decreased by 2.4% from to a median price of $403,700 in March 2025. Inventory significantly grew by 8.1% to a 4.0 months’ supply. For perspective, a balanced market between buyers and sellers is a 6-month inventory.

• Other Pertinent Housing Data. First-time buyers accounted for 32% of sales during March, which remains unchanged from March 2024. Cash sales constituted 26% of the transactions during March, which is down from 28% year-over-year. Individual investors or second-home buyers, who often make cash purchases, closed 15% of home sales during March, which represents the same percentage of sales as in the previous March.

  
  

(Source: Green, Troy, “Existing-Home Sales Receded 5.9% in March,” National Association of Realtors, April 24, 2025.)

The Texas Economy

The pervasive uncertainty has begun to negatively impact the Texas economy despite slight growth through Q1 2025. As the country’s top trading state, Texas traded in excess of $850 billion during 2024, which represented 16% of the US total.

• Job Performance. The jobs report for Texas remained strong during March with the addition of 26,500 new jobs. Over the last year, Texas added 192,100 jobs, while the unemployment rate of 4.1% remained unchanged through Q1 2025. For perspective, the US unemployment rate was 4.2% in March, up from 4.1% in February and 4.0% in January 2025. (Source: “Over 26,000 Jobs Added as Texas Labor Market Continues Growth Streak,” Texas Workforce Commission, April 18, 2025.)

• Residential Real Estate. According to MetroTex Association of REALTORS®, Q1  2025 ended with a slight increase of 1.0% to $339,990 in the median home sale price in Texas compared to March 2024. Active listings also spiked by an impressive 30.7% to 132,993, while closed sales decreased by 1.5% to 26,189. The velocity of sales continued to slow with an increase in days on market of 8 to 103 total days from March 2024. The months of inventory have also increased to 4.8 months in March 2025, up from 3.7 months in March 2024. For a frame of reference, a balanced market between buyers and sellers is six months. (Source: “March 2025 Texas Housing Report,” MetroTex, March 2025.)

DFW Residential Real Estate Sales

During Q1 2025, the DFW Metroplex residential real estate market appeared to be shifting more toward a buyer’s market with greater inventory and price adjustments. Home prices are relatively stable, as the notable surge in inventory gives buyers more choices.

(Source for bullet points below: MetroTex in conjunction with the Texas A&M Real Estate Research Center, “March 2025 DFW Metroplex Housing Report,” MetroTex, March 2025.)

• Home Prices. The DFW Metroplex saw a very slight increase in the median home price of 0.1% to $395,528 in March 2025 year-over-year.

• Home Sales. The average number of sales that closed increased by a slight 0.7% to 7,884 during March 2025.

• Inventory. As we saw during December 2024, the number of Active listings grew significantly with an increase of 36.1% to 29,829 during March 2025, while the average months of inventory increased to 3.9 from 2.9 year-over-year. As a reminder, a balanced market has 6.0 months of inventory.

• Velocity of Sales. Sales averaged 96 days from listing to close, which represents 12 more days than the market did in March 2024. 

Commercial and Multifamily Market

During Q1 2025, the national commercial real estate market grew steadier, as the multifamily sector struck an equilibrium between supply and demand after a long period of oversupply. The office sector performed stronger despite still feeling the effects of remote working with the uncertainty of utilization. The retail sector is now rightsized, as the industrial market rebalanced after years of growth. (Source: La Salvia, Thomas; Chen, Lu; Luettke, Nick; Caputo, David; and Pelegrini, Mike,“Q1 Moody’s CRE Preliminary Trend Analysis," Moody’s, April 1, 2025.) That’s all good news!

The DFW commercial real estate market is also beginning to become more balanced. The multifamily market experienced strong demand with the absorption of 7,350 new units and a slight rent decrease of -0.7% in Q1 2025 year-over-year (Source: “Q1 2025 Dallas-Fort Worth Multifamily Market Report,” MMG Real Estate Advisors, April 2025). Meanwhile, the industrial sector experienced a positive start to 2025 and is expected to remain a solid performer through 2025. (Source: Adatia, Noor, “DFW industrial market ranks in top 3 nationally for surpassing this threshold,” Dallas Business Journal, April 29, 2025.)

New-Home Construction 

The picture is not pretty for new-home builders these days. In North Texas, builders decreased new-home starts by 10.8% during Q1 2025 from the same time period in 2024, according to Residential Strategies. In part this was due to an increase in finished vacant inventory, which often requires price reductions and buyer incentives to sell through. This, of course, diminishes builder profits. While the relatively high mortgage rates and slowing job market remain challenging, the impending tariffs would only worsen the constraints for builders.

To prepare for price increases due to tariffs, many suppliers are sending letters of warning, and some builders are stocking up on supplies. Lumber is a grave concern with the current tariff on Canadian lumber at 14.5%. It is believed an additional 10% tariff may go into effect later this year. Tariffs on Chinese goods are anticipated to increase the cost of new-home construction in North Texas by $10,000 to $22,000. (Source:  Wooten, Nick, “D-FW homebuilders started slower in 2025. Tariffs could make it worse,” Dallas Morning News, April 11, 2025.)

Food for Thought:

“Don't wait to buy real estate, buy real estate and wait.”

— Will Rogers