Homebuyers have more options to choose from than they’ve had in 5 years, but relatively high mortgage rates and still-rising home prices are keeping the spring selling season subdued.

April BLS jobs report was stronger than expected. The US added 177K jobs in April, above expectations for 130–140K. The unemployment rate, meanwhile, was flat at 4.2%. So no obvious signs of trouble, even after the ‘Liberation Day’ tariffs which were unveiled on April 2. [BLS]

TP: It is very, very likely that the 177K figure will be revised down over the next two months. As part of this release, the March and February numbers were revised down by a total of 58,000 jobs. The issue is that the market typically reacts to the initial figure but ignores the subsequent revision. [More on this later.]

The $1 million “starter” home. More like “non-starter” haha! There are now 233 cities (spread across 26 states) where an “entry-level” home costs more than a million. California has 113 of them, New York 32, New Jersey 20, and Florida 11. [Zillow]

Housing inventory up big. In April 2025, total active inventory (which excludes homes under contract) rose 7.5% month-over-month (pretty normal for this time of year) and 30.6% year-over-year to 959,251 units (that’s big). That’s the highest inventory level since December 2019. [Realtor.com]

TP: Make sure you check my state-by-state analysis of housing inventory and home price trends later in this report. How is your state doing?

The Fed’s “pause” continues. For the third meeting in a row, the Federal Reserve’s Open Markets Committee (FOMC) voted to keep the Fed Funds Rate in the target range of 4.25%-4.50%. The last time the Fed cut rates was December 18, 2024. [Federal Reserve]

TP: In April, annual “core” PCE growth slowed to 2.6% YoY. (The Fed’s target is 2.0%.) “Jobs week” was overall pretty weak — though the BLS headline did look like a beat. And 1Q 2025 GDP contracted. For all these reasons, you’d expect the Fed to be cutting rates. But with the impact of tariffs so uncertain, and the unemployment rate still low at 4.2%, Fed members believe they can wait for the next set of data points. The next Fed meeting is on June 18.

More Homes on the Market — back again? In early 2023, a bill was introduced (H.R. 1321) to increase the size of the capital gains tax exclusion for the sale of a principal residence to $500K (single) and $1M (married). The goal: to dramatically reduce the tax burden for home sellers, and therefore, increase the inventory of homes for sale. H.R. 1321 has yet to see a vote, but now the NAR and a bipartisan group of legislators are pushing for it to become a law. [Congress.gov]

TP: You might not know this, but the current, fixed $250K (single) and $500K (married) capital gains tax exclusion amounts were set in 1997! Since then, home prices have risen 272%. That means that sellers have been paying the IRS a higher percentage of their housing profits. If this bill passes, it could “unlock” a lot of “locked-in” sellers — and it would also be yet another boon for the home equity-rich Boomers!

Where Did All the Jobs Go?

The BLS released its first look at April jobs data in early May. Later, in the May and June reports, that April figure will get revised — and chances are that it will be revised down.

The problem is that the bond market reacts to the headline figure, but typically ignores the revisions. Why? Because people are too busy looking at the new month’s headline data! As the table below shows, the number of jobs added in 1Q 2025 has already been revised down by a total of 124,000 (an average of 41,000 per month)!

BLS Non-farm payroll (monthly jobs added in thousands)

And this certainly isn’t just a 2025 thing. In 2024, the monthly job additions were revised down by a total of 211,000 (~18,000 per month). And in 2023, the monthly job additions were revised down by a total of 360,000 (30,000 per month).

Where would treasury yields (and mortgage rates) be if we got the right (revised) jobs number first? We’ll never know, but you’d have to think a good deal lower.

Where is all the Inventory?

I always enjoy digging into the latest monthly numbers from Realtor.com’s Residential Listing Database. In April 2025, total active inventory (which excludes homes under contract) rose 7.5% month-over-month (pretty normal for this time of year) and 30.6% year-over-year to 959,251 units. That’s the highest inventory level since December 2019.

Given normal seasonal patterns, we will almost certainly be back above 1,000,000 in inventory by the end of next month! That said, we are still ~16% below pre-pandemic levels (April 2019 = 1,137,210).

And as I’ve noted previously, the inventory situation is very different from state to state. Broadly speaking, the South and West have inventory levels that are near or above pre-pandemic levels, while the Northeast and Midwest have inventory levels that are still well below pre-pandemic levels.

Inventory is also concentrated in a few states. Florida and Texas alone represent 32% of the total active inventory in the country, despite only having 15% of the population. And both states’ inventory levels are ~25% above April 2019 levels. It’s a totally different situation for New York State and Pennsylvania, where inventory levels are still ~45% below pre-pandemic levels.

In fact, there are currently 9 states with inventory levels (April 2025) that are ABOVE pre-pandemic levels (April 2019). You’ll notice that all these states are in the South or the mountain West. You may also recall that most of these states benefited heavily from pandemic-era migration trends AND saw huge home price movements.

9 States with Inventory Levels (Apr 2025) ABOVE Pre-Pandemic Levels (Apr 2019)
Texas: +27.6%
Colorado: +27.5%
Florida: +22.7%
Tennessee: +19.8%
Arizona: +15.5%
Utah: +15.3%
Washington: +11.6%
Idaho: +9.9%
Hawaii: +2.9%

So are home price trends reflecting the supply situation in these states? In general, yes. There are currently 10 states where median listing prices are DOWN year-over-year, and half of those were in the list above.

Hawaii: -7.0% YoY
Kansas: -6.5% YoY
Iowa: -5.4% YoY
Illinois: -3.8% YoY
Montana: -3.7% YoY
Colorado: -2.6% YoY
Arizona: -2.4% YoY
Florida: -2.2% YoY
Delaware: -2.0% YoY
Tennessee: -2.0% YoY

It’s important to note a few things about the data above. First, we’re looking at median listing prices, which can easily be skewed by the “mix” of properties available. Second, you can’t look at supply in isolation; many of these states saw an influx of new residents, and that means higher demand. Third, we’re only looking at existing homes; and many of the states with inventory levels above pre-pandemic levels ALSO saw an apartment and home building boom.

OK, So Where are Home Prices Falling?

The Realtor.com data also looks at the median listing price on a monthly basis. I was curious which cities were seeing the largest declines. Remember: the listing price can be seriously skewed by the mix of properties on sale from month to month — so this is a far-from-perfect measure of appreciation or depreciation. Still, here’s what I found:

• Of the Top 100 cities by household size, 48 (48%) saw year-over-year declines in their median listing prices in April 2025. But most of those YoY declines were small (1–3%).
• The biggest decreases among the Top 100 were: Bridgeport CT (-18% YoY), Urban Honolulu HI (-11% YoY), Durham NC (-10%), and Wichita KS (-8%).
• The largest increases among the Top 100 were: Syracuse NY (+28%), Toledo OH (+14% YoY), Providence RI (+12% YoY), Baltimore MD (+11% YoY), and Harrisburg PA (+11%).
• Taking a look at the next 100 (101–200), once again 48 (48%) had YoY declines. Flint MI (-21% YoY) and Champaign-Urbana IL (-15% YoY) had the biggest drops among this cohort. Biggest gains? Evansville IN (+15% YoY) and Lansing MI (+13% YoY).

We’ve got to be careful here, because more accurate measures of home price appreciation (Case-Shiller, FHFA etc.) are saying that home prices are still trending up in all the bigger cities except Tampa. And even Tampa is only down slightly after rising by ~70% over the previous 5 years.

Mortgage Market

The Fed kept rates on hold — again. A 25 bps rate cut is expected at the next meeting, but that is far from a sure thing given the uncertain impact of tariffs.

With average 30-year fixed-rate mortgages hovering around 7%, I feel another spring selling season slip sliding away. If mortgage rates don’t move lower, inventory is really going to start to pile up, and that could accelerate price declines in markets where inventory (both existing and new) is already high.

Here’s what the Fed Funds Rate futures market is currently pricing in for rate cuts. Note that the current Fed Funds Rate policy range is 4.25–4.50%.

• June 18 FOMC Meeting: 66% probability of a 25 bps rate cut at this meeting (slightly higher than last week), 34% probability that the policy rate will remain at 4.25–4.50%.
• July 30 FOMC Meeting: 56% probability that rates will be 25 bps below current (implying one 25 bps rate cut on either June 18 or July 30, but not both). 23% probability that rates will be 50 bps below current (implying a 25 bps rate cut at both meetings).

They Said It

“We see sentiment, there are concerns that higher prices may be coming, or things like that. People are worried now about inflation. They’re worried about a shock from the tariffs. But they really haven’t, that shock hasn’t hit yet. We’re going to be looking at not just the sentiment data, but also the real economic data as we assess what it is we should do.” — Jerome Powell, Federal Reserve Chairman

“New apartments are being rented out at the slowest speed on record [see vacancy rate chart below], and builders are pumping the brakes because elevated interest rates are making many projects prohibitively expensive. At some point in the next year, the slowdown in building will mean that renters have fewer options — potentially leading to an increase in rents.” — Sheharyar Bokhari, Redfin’s Senior Economist

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