CALCULATEDRISK
By Bill McBride
Last week, Housing Wire Editor in Chief Sarah Wheeler asked Lead Analyst Logan Mohtashami the above question: “How do you grade the Spring housing market?”
My friend Logan replied: “Generally, just for how I look at housing, this kind of gets an A …”
I almost fell out of my chair!
Then Logan added: “… only in the sense that of course sales aren’t booming or anything of that nature. But what I wanted to see in the 2025 year was similar to what I saw in 2024, in terms of … we’re going to list them off: Number 1, Inventory growing at a healthy pace – that’s a positive, price growth is cooling down – that’s a positive, number 3, we see more concessions being done.
I have a different view.
Stakeholders in the Housing Market
First, there are many different stakeholders in the housing market. For some people their income is related to the number of transactions, like real estate agents, escrow officers, appraisers, mortgage brokers, and to some extent remodel contractors, furniture retailers, and more.
So far, through April, existing home sales are running behind last year, and 2024 was the lowest year for existing home sales since 1995! For these stakeholders, 2025 is a bust (so far).
Note: the NAR is scheduled to release April Existing Home sales on Thursday, May 22nd at 10:00 AM. The consensus is for 4.15 million SAAR, up from 4.02 million in March. Housing economist Tom Lawler expects the NAR to report sales of 3.98 million SAAR.
Another set of stakeholders are new home builders, various contractors and suppliers. And once again furniture retailers, and others that provide goods and services to homeowners. For these stakeholders, new home sales are running at close to the same rate as in 2024, and well above the lean years that followed the housing bubble. So far 2025 has been OK, however, based on policy and the homebuilders survey released last week, it appears these stakeholders will face some headwinds for the remainder of the year (Not an “A”, but not a bust). From the survey:
“Builder confidence fell sharply in May on growing uncertainties stemming from elevated interest rates, tariff concerns, building material cost uncertainty and the cloudy economic outlook.”
There are other stakeholders too. Potential home sellers and buyers, other homeowners, investors, local governments (property taxes), and more.
What is good for some stakeholders – like higher prices for home sellers – is a negative for homebuyers. And more inventory is a negative for sellers and a positive for buyers. Note that more housing inventory doesn’t necessarily lead to more transactions, in fact it might lead to fewer transactions as buyers feel less urgency and become concerned that prices might fall.
So, if I’m asked to grade the housing market, I’d ask for which stakeholders? Usually, I think in terms of transactions, and right now I’d give the existing home market an “F” and the new home market probably a “C+”.
That is why I almost fell out of my chair!