Housing | Fall 2025

At the midpoint of 2025, the housing market could best be described as strained. During the peak buying season, the spring market has struggled to build momentum due to mounting affordability pressures, slowing sales activity, and moderating home price appreciation.

Following a slow first quarter, Texas spring home sales remained on a downward trajectory, delivering another subdued performance in the second quarter. In addition to persistent affordability challenges weighing on many would-be buyers, housing activity was impacted by intensifying trade tensions and spillovers to global financial markets—factors that amplified economic uncertainty and kept mortgage rates high. The uncertainty surrounding potential interest rate cuts—compounded by ongoing political pressure from President Trump for the Federal Reserve to act sooner—has likely led some prospective buyers to hold off, hoping for lower rates in the second half of the year.

A surge in active inventory and influx of new listings pushed availability to a 14-year high during the spring buying season. This marks the most significant supply buildup since spring 2011, a time when the housing market was grappling with widespread foreclosure backlogs amid a prolonged housing downturn.

Source: Texas Real Estate Research Center analysis of Data Relevance Project, Texas REALTORS® data

As of June, housing inventory continues to expand, widening the supply-demand imbalance. Despite being at the peak of the spring buying season, affordability is causing homes to sit longer on the market and prompting sellers to reduce prices at record levels. In major urban markets, home prices are weakening with price growth stalling under mounting inventory pressure.

Still, some buyers are capitalizing on current conditions as record-high inventory levels have provided expanded choices and leverage for negotiation. Cash buyers—unaffected by financing costs—are well positioned to negotiate amid ample inventories. Similarly, financially strong buyers may not like today’s high mortgage rates, but they aren’t deterred by them either.

Large homebuilders are also gaining a competitive edge. By leveraging affordability adjustments—such as rate buydowns to offset elevated mortgage rates and closing costs—builders can keep sales volume relatively steady and clear inventory faster than the broader market. New home sales are steadily gaining market at the expense of resales as high mortgage rates continue to weigh heavily on resale activity. Meanwhile, the expanding supply of smaller, more affordably priced new construction has also bolstered its price competitiveness and accessibility to less affluent buyers.

Source: Texas Real Estate Research Center analysis of Data Relevance Project, Texas REALTORS® data

Looking ahead, new home sales will continue to outperform resales and are on track to capture an even larger market share in the second half of the year thanks to builder affordability incentives. The latest July and August job reports indicate a marked slowdown in the U.S. labor market, with substantial downward revisions to earlier employment figures. Amid growing concerns over economic slowdown, the Federal Reserve signaled in August an openness toward accommodative monetary stance. In response, mortgage rates have declined sharply from their spring peak of 7 percent, largely in anticipation of a 25-basis point policy rate cut, which was announced on Sept. 17.

Lower borrowing costs are expected to bring more buyers and pent-up demand back into the market. With inventory still elevated following a challenging spring season, the shifting conditions offer opportunities for both buyers and sellers.

Yanling Mayer, Ph.D. ([email protected]) is a research economist with the Texas Real Estate Research Center.