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Spring Housing Shock: Midwest Prices Surge While Buyers Hesitate Nationwide
- 2025/03/17
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This week, we're navigating the confusing landscape of the 2025 spring housing market. We'll delve into surprising regional trends, explore the ongoing impact of inventory shortages and surpluses, and analyze whether recent dips in mortgage rates are enough to overcome buyer anxiety.Regional Housing Market Disparities:The Midwest is experiencing the fastest home price growth in the nation.Milwaukee's median sale price jumped a record 20% year over year in February, reaching $330,000. This was the biggest increase among the top 50 most populous metros.Detroit also saw a double-digit gain of 12.5%, with a median sale price of $180,000, the lowest among major metros.Cleveland also experienced a significant price increase of 10%.This surge is primarily attributed to a housing shortage prompting buyers to bid up prices. Three of the five metros where housing supply is falling fastest are in the Midwest, with Detroit seeing the largest year-over-year drop in active listings (-6.7%), followed by Milwaukee (-3.7%) and Cleveland (-3.6%).Despite rising prices, the Midwest remains the most affordable homebuying region.In contrast, home prices are falling fastest in Texas and Florida.Austin, TX, saw the largest year-over-year median home sale price decline (-2.7%), reaching $430,000.Tampa, FL (-1.9%), San Antonio (-1.7%), Houston (-1.5%), Atlanta (-1%), and Jacksonville, FL (-0.8%) also experienced price drops.This is due to a surging supply of homes for sale in many parts of Texas and Florida, giving buyers the upper hand. This increased supply is partly due to more home building.In Florida, unsold inventory is also piling up amid rising insurance costs, HOA fees, and intensifying natural disasters.One agent in Dallas noted that there are about five times more home sellers than buyers, creating a buyer's market.National Housing Market Trends:Nationwide, home prices rose 3% to 3.2% year over year in February, with a median sale price of $425,421. This was the slowest growth in six months.Pending home sales fell 6.2% year over year, the biggest decline since September 2023.The typical U.S. home that sold last month was on the market for 54 days, the longest for any February since 2020. Homes took the longest to sell in Florida and Texas.Nationwide, active listings rose 10.7% year over year, reaching the highest level since June 2020. However, many Midwest markets continue to see declines.New listings fell 4.7% year over year.Mortgage rates: The average 30-year fixed mortgage rate was 6.84% in February, down slightly from 6.96% a month earlier. Rates have dipped further in March, sitting around 6.65%.Despite slightly lower mortgage rates, consumer optimism about the housing market remains low. Fannie Mae's housing sentiment index dropped, driven by pessimism about future mortgage rate decreases.Mortgage applications have increased due to the recent decline in rates, with purchase applications also seeing a rise. However, this hasn't yet translated into a significant increase in pending sales.Economic uncertainty, including potential recession fears and stock market volatility, may be keeping some buyers on the sidelines.The Role of New Construction:New construction is influencing affordability, with the South seeing the biggest benefits due to higher-than-average building permit issuance.Austin, with the highest rate of building permits among the 50 largest markets, saw a slight decrease in home price appreciation.Tampa, with a higher-than-average number of permits, saw the biggest decrease in home prices.Areas with below-average construction, like Pittsburgh, saw significant price increases.The nation is facing a shortage of roughly 3.8 million homes. The timeline to close this gap varies significantly by region. The South could close its gap in about three years, while the Midwest could take 41 years at the current pace.Expert Insights:A Redfin agent in Detroit noted the "weird" market with some homes attracting bidding wars while others sit for weeks. Move-in ready homes in desirable areas often see the most competition.Redfin agents advise sellers to ensure their homes are in good condition and fairly priced to find buyers quickly in the current environment.Economists suggest that unless the economy weakens considerably, mortgage rates are not expected to fall much further.Concerns about job security and a potential recession are contributing to buyer anxiety.Conclusion: The spring housing market of 2025 presents a complex picture with significant regional variations. While the Midwest is experiencing rapid price growth due to limited inventory, Texas and Florida are seeing prices decline with increased supply. Nationally, slightly lower mortgage rates are sparking some demand, but economic uncertainty is causing many buyers to hesitate. The impact of new construction on affordability is evident in certain regions, but a significant nationwide housing shortage persists. Navigating this market requires careful ...