Residential real estate: what’s happening with sales, prices, rents?

For many clients, their biggest single asset is their home and, along with the volatility seen in financial markets recently, things are not certain for the residential real estate market.

First, sales. The National Association of Realtors reported Thursday that existing home sales edged lower by 0.5% in April compared to April and were down 2% year-over-year.

"Home sales have been at 75% of normal or pre-pandemic activity for the past three years, even with seven million jobs added to the economy," said NAR Chief Economist Lawrence Yun. "Pent-up housing demand continues to grow, though not realized. Any meaningful decline in mortgage rates will help release this demand."

The number of homes available on the market increased 9% in April and was 20% higher than a year earlier, but prices are gaining for now with the median existing home price of $414,000 representing a 1.8% increase year-over-year.

But sales are price rises depend on location with the Northeast leading on both, while sales are lower elsewhere and prices are higher in the Midwest but down in the South and West. And there could be more downward pressure to come.

"At the macro level, we are still in a mild seller's market," Yun said. "But with the highest inventory levels in nearly five years, consumers are in a better situation to negotiate for better deals."

Further on prices, Redfin is predicting that nationwide, prices will dip 1.1% by year end on expectation that mortgage rates will remain around 7% for the remainder of 2025.  This is significant as prices have been rising year-over-year every year since 2021, with the exception of 2023.

The softer market is shown in the firm’s analysis of home buyers who have got cold feet and canceled. This happened in more than 14% of homes that went under contract in April, the highest share for the month since at least 2017 (except for 2020 during the pandemic).

“One of the only things that could drive rates down is if the administration eliminates all of the new tariffs and makes it clear they’re not coming back,” said Chen Zhao, Redfin’s head of economics research. “Rates could also drop if the country dips into a severe recession. But that is less likely now that the trade war has been scaled back, and it would be counterproductive for house hunters because even though mortgage rates would be lower, many buyers would have less money to buy a home.”

While homeowners and investors looking to realize their residential real estate assets through sale may see some weakening conditions, those with homes on the rental market should be seeing better returns.

Industry data from Cotality shows that US single-family rent prices increased 2.9% year over year in March, the third consecutive month of gains.

“National trends are firming,” said Molly Boesel, Cotality senior principal economist. “Markets with large numbers of new rental units coming online showed softness in single-family rents, as these new units give renters some bargaining power. This can be seen in the single-family rent growth in Dallas, which showed an annual decrease of 0.5% in March.”

For high-end properties rent nationwide was up 3.5% compared to 2.1% for low-end properties.

Rent for both detached and attached rentals grew by 2.8% in March.