Welcome to the latest edition of The Full Measure, where we analyze the latest developments in the housing market and their impact on real estate appraisers.
As I write this, the Federal Reserve is meeting to decide whether to bow to political pressure or stick to its economic guns. Spoiler alert: they’re holding rates steady, but the drama surrounding this decision tells us everything we need to know about the crosscurrents buffeting our housing market right now (Reuters).
We’re in one of those periods when the data points in multiple directions simultaneously, creating opportunities and challenges for those of us whose job it is to determine accurate property values.
The Tale of Two Markets: Inventory Abundance Meets Buyer Hesitation
Here’s a statistic that should make every appraiser sit up and take notice: we’ve crossed the one million mark for active home listings nationwide. We hit this milestone in both May and June 2025, marking a dramatic turnaround from the inventory-starved conditions that made our jobs so challenging during the pandemic years (Realtor.com).
But despite this inventory surge, buyers are largely staying on the sidelines. Existing home sales dropped 2.7% in June to 3.93 million seasonally adjusted annual rate, marking the fifth consecutive month of unchanged or declining year-over-year sales. This isn’t a supply problem anymore; it’s a demand problem driven by affordability constraints.
What does this mean for your daily work? You’re likely finding more comparable sales to choose from, which should improve valuation reliability. But with more inventory comes more price variation and longer marketing times, meaning you need to be even more careful about comp quality and relevance.
The months-of-supply metric tells the story. We’re now at 4.7 months nationally, compared to 4.3 months in June 2019. We’re likely heading toward 5.0 months of supply later this year, which historically puts downward pressure on prices.
The Price Deceleration: Reading the Tea Leaves
While inventory tells one story, price trends tell another. The Case-Shiller National Index shows clear deceleration, with year-over-year increases dropping from 4.2% in January to 2.3% in May 2025. More timely indicators suggest even greater deceleration.
The National Association of Realtors reported median prices up just 2.0% year-over-year in June, but when we look at seasonally adjusted month-over-month changes, we see actual declines. The Case-Shiller index fell 0.29% in May—the third consecutive monthly decrease.
For appraisers, this creates what I call the “lag trap.” When you use sales from three to six months ago as comparables, you might be looking at transactions from a different market environment. The Case-Shiller May index reflects a three-month average of closing prices from March, April, and May—and March closings include contracts signed in January.
This lag effect means your most recent comparable sales might overstate current market values. In rapidly changing markets, you need to be more aggressive about adjusting for market conditions.
The Federal Reserve’s Tightrope Act
The Fed is expected to hold rates steady amid intense political pressure to cut rates dramatically. President Trump has suggested cutting the federal funds rate from 4.25%-4.50% to as low as 1% – far out of line with current economic conditions (Reuters).
With inflation running at 2.7% annually, core inflation at 2.9%, and unemployment at 4.1%, there’s little economic justification for aggressive rate cuts. For housing, this means mortgage rates will likely remain elevated in the 6.6%-6.9% range (Realtor.com).
The rate environment is creating a bifurcated market where affordability constraints keep many buyers on the sidelines, while those who can afford to buy face less competition.
The New Home Reality Check
The new home market tells its own story. In June, new home sales increased to 627,000 at an annual rate but declined 6.6% from June 2024, marking six consecutive months of year-over-year declines.
More telling is the inventory situation: 9.8 months of supply—well above the normal 4-6 month range. The inventory of completed homes, at 119,000 units, is almost quadruple the February 2022 record low.
The Inflation and Climate Factors
June’s Consumer Price Index showed overall inflation at 2.7% annually, with core inflation at 2.9% – both above the Fed’s 2% target. Shelter costs increased 0.2% monthly but remained the largest contributor to overall CPI gains.
We’re beginning to see early tariff effects: apparel prices rose 0.4%, household furnishings increased 1.0%, while vehicle prices fell. This matters for appraisers because it affects construction costs and buyer purchasing power.
Buyers are increasingly factoring climate resilience into decisions, with the Midwest and Northeast benefiting from lower climate risk profiles. In top-ranked Manchester-Nashua, just 4.4% of properties face severe climate risk over 30 years, compared to much higher percentages in Florida, Texas, and California markets (Realtor.com).
Looking Ahead: What to Watch
Several key trends will shape the remainder of 2025:
- Inventory Normalization: We’re on track to return to pre-pandemic levels by fall, continuing to moderate price growth.
- Regional Rebalancing: The shift toward affordable, climate-resilient markets will continue.
- Rate Environment: Despite political pressure, mortgage rates will likely remain elevated until we see sustained disinflation.
- Affordability Crisis: With only 11 metros offering genuine affordability, demand constraints will persist.
The Bottom Line for Appraisers
We’re entering a period where your expertise and local market knowledge will be more valuable than ever. The days of rapidly appreciating markets that lifted all boats are behind us. What’s ahead is a more nuanced, regionally varied market where careful analysis and deep understanding of local conditions will separate good appraisal work from great work.
Market conditions are changing more rapidly than they have in years, which means time adjustments and market condition adjustments will require more sophisticated analysis. Pay attention to inventory trends in your local market, understand how your region fits the broader picture, and don’t hesitate to apply negative time adjustments when conditions warrant.
Most importantly, remember that in a market this complex and rapidly evolving, your role as the professional who truly understands local real estate conditions has never been more important. The housing market is rebalancing, and while that creates challenges, it also creates opportunities for appraisers prepared to adapt to these new realities.
Stay sharp, stay informed, and remember: in a market this dynamic, being right matters more than being fast.
Keep your appraisal skills sharp and stay up-to-date with your licensing with McKissock’s appraisal continuing education courses!
