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.
Each month, I’ve opened this blog with a look at what’s moving the market. This time, I’ll begin with what isn’t. Despite rising inventories and steady economic growth, a sense of stall has crept into the housing sector.
May was a month of missed momentum—sales edged upward, yet confidence declined. Price appreciation continued, but more slowly. Inventory increased, but new construction took a step back. The pause in Fed policy is also being mirrored by a broader pause in market conviction.
In short, we are witnessing a housing economy defined by hesitation.
New Construction: Sliding Confidence, Slowing Starts
The most striking development this month came from the builder side. Builder sentiment dropped to 32 in June, the third-lowest reading since 2012 according to the NAHB/Wells Fargo Housing Market Index.
The combination of persistent mortgage rate pressure and elevated construction costs, exacerbated by the ongoing trade conflict, has pushed 37% of builders to cut prices, the highest share since NAHB began tracking this metric monthly (NAHB).
Permits and starts are also showing signs of fatigue. May saw total permits drop 2.0% month-over-month and 1.0% year-over-year, with single-family permits down 6.4% year-over-year. Though completions remained elevated, suggesting that previous momentum is still feeding into supply, the development pipeline is clearly tightening.
This will likely constrain new inventory in 2026 even as current buyers benefit from builder concessions and incentives.
Existing Homes: More to Choose From, Fewer Ready to Buy
Meanwhile, the existing-home market showed a modest improvement in May. Sales rose 0.8% to a seasonally adjusted annual rate of 4.03 million units. Inventory grew 6.2% month-over-month and 20.3% year-over-year, pushing months of supply to 4.6. For the first time since 2023, many markets are approaching balanced inventory conditions.
Still, the market remains tepid. The 30-year fixed mortgage rate is stuck near 6.8%, and first-time buyers made up just 30% of May’s purchases, down from 34% in April. The high median price of $422,800, a new record for May, continues to suppress affordability despite modest year-over-year growth of 1.3% (NAR).
Pending home sales, a leading indicator, fell 6.3% from April to May, reflecting continued buyer resistance to current rate and price levels.
Price Growth Slows, and Short-Term Trends Turn Negative
Despite record-high home prices in nominal terms, appreciation is losing steam. The national median existing-home price hit $422,800 in May, up 5.8% from a year ago, but the rate of change is decelerating. More importantly for appraisers, the latest seasonally adjusted data from the S&P CoreLogic Case-Shiller Index and the FHFA House Price Index both show a 0.4% month-over-month decline from March to April (S&P Global).
This marks the second consecutive monthly decline in the Case-Shiller seasonally adjusted index, accompanied by notable regional divergence. The Northeast and Midwest are currently leading in price stability, while former high-growth metros like Tampa, San Francisco, and Austin are showing year-over-year pullbacks. FHFA data confirmed similar trends, with the largest price declines in the West South Central and South Atlantic regions.
The Fed: Steady for Now, With a Tilt Toward Cuts
At its June meeting, the Federal Reserve held the federal funds rate steady at 4.25%–4.50%, continuing its “wait and see” posture amid still-elevated inflation and global uncertainty. The Fed now projects two quarter-point cuts by the end of 2025, down from prior expectations of three. Chair Powell reiterated the Fed’s focus on shelter costs as a stubborn driver of inflation, linking ongoing price pressures to structural housing shortages.
While inflation data has softened, April saw the lowest core reading in over four years, tariff effects and geopolitical tensions continue to cloud the inflation outlook. For now, the Fed is holding firm, and the mortgage market is likely to stay in the high-6% range for the foreseeable future (NAHB).
Zonda Insight: Buyers Are Waiting, Builders Are Adapting
Zonda’s May data echoes the same theme: caution. New home sales dropped 5.8% year-over-year, and 38% of builders reported price cuts in May, up from 35% in April. While community counts and quick move-in inventory are growing, sales-per-community metrics are down, and the Zonda Market Ranking (ZMR) has shifted from “overperforming” to “average” (Zonda).
Zonda Chief Economist Ali Wolf summarized it best: “When asking ‘Should I buy now or wait?,’ the answer for many is to wait.” This consumer indecision is the hallmark of the current market and a crucial context for appraisal professionals navigating demand-side adjustments.
What this Means for Appraisers
As always, appraisers must cut through the noise and focus on the fundamentals:
- Watch incentives and concessions closely, especially in new construction comps. These are increasingly necessary to secure deals, but they can complicate the interpretation of market value.
- Apply time adjustments carefully. While year-over-year metrics remain positive, seasonally adjusted trends show flat or declining prices in many regions.
- Expect greater price stratification. Entry-level homes are facing the brunt of affordability constraints, while high-end properties are seeing more stable pricing.
- Be attentive to regional variation. The Midwest and Northeast are outperforming, while the West continues to underperform in both sales volume and pricing.
Final Takeaway
The June housing economy is not collapsing, but it is recalibrating. We are in a holding pattern—with steady rates, hesitant buyers, and builders adjusting to thinner demand. As the Fed continues to pause and supply slowly builds, we may be heading into a more balanced market. For appraisers, that means being precise, observant, and data-driven. This isn’t 2022’s frenzy or 2009’s crash. It’s something more nuanced, and your expertise matters now more than ever.
Until next month, keep measuring the market—not just by the numbers, but by what those numbers mean.
Keep your appraisal skills sharp and stay up-to-date with your licensing with McKissock’s appraisal continuing education courses!
