Welcome to your March 2025 Real Estate Market Update! The market’s shaking off the winter chill and springing into action—whether you’re house hunting or just keeping an eye on trends, there’s a lot happening. Rates are shifting, buyers are buzzing, and sellers are getting creative. Grab your coffee, settle in, and join us as we dive into what’s hot (and what’s not) this month in the world of real estate!
With declining rates, more people are searching for homes and applying for mortgages.
Prospective homebuyers are hitting the streets as mortgage rates dip to their lowest point since mid-December, but that enthusiasm hasn’t yet translated into sales.
As mortgage rates continue to decline, more buyers are stepping up for home tours. Mortgage-purchase applications jumped by 7% this week, reaching their highest level since February, as average mortgage rates hit their lowest levels since mid-December. Google searches for “homes for sale” are up 10% year over year, reaching their highest point since July, and Redfin’s Homebuyer Demand Index—tracking home tours and services from Redfin agents—has also surged to its highest level of the year.
However, despite the increased house-hunting activity, the boost hasn’t led to more home sales just yet. Pending home sales fell 6.1% year over year during the four weeks ending March 9, continuing the trend of recent months.
“Mortgage rates are dropping due to a cloudier economic outlook, with concerns about things like tariffs and a softer-than-expected job market,” said Chen Zhao, Redfin’s Economic Research Lead. “While lower rates have brought some buyers back into the market, they haven’t yet driven more sales. Potential buyers are still weighing whether the lower payments are enough to make purchasing a home worthwhile amid the uncertainty of the economy. Job security and fears of a possible recession remain top concerns.”
On the selling side, new listings are up 3.1% year over year, showing a similar increase to what we’ve seen in recent months. As we head into the spring homebuying season, expect listings to continue rising as more homeowners respond to the growing demand from buyers.
Nationwide, investor home purchases dip modestly, with a notable decline in certain areas of Florida.
U.S. real estate investors bought 47,004 homes in the fourth quarter, the lowest number for that period since 2016. This represents a 3.9% decline from the previous year, marking the largest drop in a year.
This data comes from a Redfin analysis of county-level home purchase records across 39 of the most populous U.S. metro areas dating back to 2000. For the purposes of this report, an investor is defined as any institution or business purchasing residential real estate, including both large institutions and smaller, individual investors.
Several factors are contributing to the decline in investor activity:
- Slowing Housing Market: Investors are purchasing fewer homes due to many of the same factors affecting other buyers—high home prices and elevated mortgage rates. U.S. pending home sales hit their lowest level on record in January, excluding the early pandemic period.
- Weak Demand: Home price growth has slowed, inventory is on the rise, and overall homebuying demand remains sluggish. These factors are making some investors hesitant to buy properties for flipping. Additionally, rents have plateaued following a surge in apartment construction, reducing the potential profitability of rental investments.
- Economic Uncertainty: Real estate investments are seen as riskier due to economic and political uncertainty. Fears of a recession, the transition to a new presidential administration, and instability surrounding inflation, tariffs, and the job market have led some investors to pull back and focus on more stable investment options, such as bonds.
- High Interest Rates: With the Federal Reserve maintaining high interest rates, mortgage rates remain elevated, making it more expensive for investors to take out loans for home purchases. While most investors (65%) pay in cash and are less affected by mortgage rates than regular homebuyers, they still feel the impact of borrowing costs when financing home flips or covering other expenses.
Redfin agents in certain regions report that investors are staying on the sidelines because they’re not seeing the returns they experienced two or three years ago. In some cases, they’re even concerned about having to sell at a loss.
In monetary terms, investors spent $36.5 billion on homes in the fourth quarter, which represents a 6.3% year-over-year increase, in line with the rise in home sale prices during the same period.
Although investor purchases are declining, the drop isn’t as steep as the one seen in late 2022 and early 2023, when rapidly rising mortgage rates significantly slowed homebuying demand, making it more expensive to purchase homes and less attractive to flip them.
U.S. Home Prices Increased by 0.4% in February, Marking the Slowest Growth Since July.
U.S. home prices rose by 0.4% in February compared to the previous month, marking the slowest growth since July 2024. Year-over-year, home prices increased by 5.1%, the smallest rise since August 2023.
Monthly price growth has ranged from 0.4% to 0.6% in 13 of the last 16 months. However, year-over-year price growth has slowed for 10 consecutive months, dropping from 7.5% in April 2024 to 5.1% in February.
With mortgage rates falling and price growth slowing, more buyers are entering the market, benefiting both buyers and sellers as the Spring homebuying season begins. In some regions, like parts of Florida and Texas, buyer’s markets have emerged, with homes staying on the market longer and prices starting to drop.
Tariffs can have several effects on real estate investors, influencing both costs and market conditions. Here’s how:
- Construction Costs
Tariffs on imported goods, particularly building materials like steel, lumber, and cement, can significantly increase the cost of construction. For real estate investors focused on new developments, higher construction costs could lead to:- Higher project costs: If raw materials or finished goods are imported from countries facing tariffs, the cost of these goods can rise. This might reduce profitability for developers or force them to pass these costs onto buyers or renters, potentially making their properties less competitive.
- Delays in construction: If tariffs cause supply chain disruptions, construction projects may face delays, affecting timelines for property completion. This could impact the investor’s ability to generate rental income or flip properties on schedule.
- Impact on Property Prices
Real estate investors might see indirect effects on property prices due to broader economic conditions shaped by tariffs:- Increased inflation: Tariffs can contribute to overall price inflation as the cost of goods rises. If inflation picks up, it might increase the cost of living, which could dampen demand for housing in some markets or lower rental income expectations.
- Reduced affordability: If tariffs result in higher costs for both materials and consumer goods, it could reduce buyers’ purchasing power. This might affect home prices, particularly in markets where buyers are already sensitive to price increases.
- Investor Confidence
- Market Uncertainty: The imposition of tariffs can create uncertainty in the broader economy, which might cause real estate investors to become more cautious. If economic growth slows or consumer spending is impacted, investors may pull back from certain markets, leading to reduced demand in the housing sector.
- Capital Investment Flows: Some investors may decide to shift capital away from real estate if tariffs make it more difficult or expensive to do business. Alternatively, international investors may become wary of U.S. markets if they perceive tariffs as a threat to their returns or long-term stability.
- Regional Differences
Tariffs could impact real estate markets differently depending on the region:- Local Economy Impact: In areas heavily dependent on industries that rely on imported goods (like construction), higher tariffs could stifle economic growth, leading to lower demand for housing.
- Emerging Markets: On the flip side, tariffs could make certain regional markets more attractive to investors if they are less affected by global trade pressures. For instance, markets in the U.S. that are less reliant on international trade might experience a smaller negative impact from tariffs.
- Potential for Increased Rent Prices
- If construction slows or the cost of building new properties rises, it could lead to fewer new homes being built. This could reduce housing supply, potentially pushing up rents as demand for available properties outpaces supply.
- Foreign Investment
- Foreign Buyers: Tariffs could dissuade foreign investors from purchasing U.S. properties if they believe the financial and economic landscape is becoming less favorable. This could reduce demand in high-end real estate markets like New York, California, and Florida, where foreign buyers have historically played a significant role.
- Retaliatory Tariffs: If other countries retaliate with tariffs of their own, this could affect industries tied to real estate, such as materials or labor costs, ultimately impacting investors’ bottom lines.
Sources:
Sources: redfin. Forbes. attom.
