May 02 2025

Reef Daily

Reef Daily | May 02 2025

Housing Market Update

Latest Market Data (May 2, 2025) The National Association of Realtors reported that the Pending Home Sales Index (PHSI) rose to 76.5 in March, a significant 6.1% increase from February, marking the largest monthly gain since December 2023. However, sales remain slightly down year-over-year by 0.6%. This monthly bounce was driven primarily by a 9.8% surge in the South, with strong showings in the West (+4.8%) and Midwest (+4.9%), while the Northeast experienced a slight decline of 0.5%.

Construction Activity Construction spending data released yesterday by the U.S. Census Bureau shows a slight contraction, with March 2025 spending at a seasonally adjusted annual rate of $2,196.1 billion, down 0.5% from February's revised estimate. Despite this monthly dip, the March figure stands 2.8% above the March 2024 estimate, indicating continued year-over-year growth in the construction sector. For the first quarter of 2025, construction spending totaled $485.7 billion, representing a 2.9% increase over the same period in 2024.

Mortgage Rates

Type	Today's Rate	Last Week's Rate
30-year fixed	6.76%	6.85%
15-year fixed	5.93%	6.06%
5/1 ARM	6.19%	6.08%

Mortgage rates decreased slightly this week, with Freddie Mac reporting the average 30-year fixed mortgage rate falling to 6.76%, down from 6.81% last week. The 15-year fixed rate also edged down to 5.92% from 5.94%. Sam Khater, Freddie Mac's Chief Economist, noted that "in recent weeks, rates for the 30-year mortgage have dipped below the first quarter average of 6.83%".

Future Forecasts According to recent forecasts, mortgage professionals expect rates to remain in the mid-to-high 6% range in the near term. Greg McBride, chief financial analyst at Bankrate, indicated that without significant signs of economic decline, 30-year fixed mortgage rates will likely stay within the high sixes and low sevens. The Mortgage Bankers Association's April forecast projects the 30-year mortgage rate will reach 6.8% in the third quarter of 2025 and settle at 6.7% by year-end.

Notable Transactions

Commercial Highlights Marcus & Millichap brokered the sale of Van Dyke Village Townhomes, a 20-unit multifamily property in Maplewood, Minnesota, which sold for $2,750,000 ($137,500 per unit). The property, built in 2004, features two- and three-bedroom units with attached garages and is situated on 3.63 acres.

Colliers announced the sale of a premier Class A industrial facility in Las Vegas, Nevada, totaling approximately 83,280 square feet. The property sold in shell condition for $290 per square foot-one of the highest price-per-square-foot transactions in the Las Vegas market for a shell industrial building of this size.

Marcus & Millichap also facilitated the sale of The Trail Inn, a 36-room hotel property in Atlanta, Illinois. The one-story hotel sits on 2 acres, is visible from Interstate 55, and recently underwent $275,000 in improvements.

Regional Activity In the West, the Las Vegas industrial market continues to demonstrate strength with premium pricing for well-located Class A facilities, as evidenced by the Colliers transaction.

Office investors are showing renewed confidence nationwide, with January 2025 data showing $6.2 billion in office property sales-an 80% year-over-year increase. This surge in transaction volume suggests some investors believe the office market downturn may be bottoming out.

Market Indicators

Inventory Trends According to Realtor.com data released on May 1, the number of active listings (which includes all homes on the market except those under contract) increased by 30.6% in April compared to the previous year. This substantial growth in inventory is providing buyers with more options and greater negotiating power in the current market.

Buyer Demographics New affordability data released yesterday shows that to purchase a home at the national median listing price of $431,250 (April data), a buyer must earn at least $114,000 annually-about $33,400 more than the 2023 median household income of approximately $80,600. This widening affordability gap continues to reshape buyer demographics, particularly impacting first-time homebuyers.

Builder Sentiment In data released May 1, the share of builders using sales incentives rose to 61% in April, up from 59% in March, while 29% of builders cut prices (unchanged from March) with average reductions holding steady at 5%. These figures indicate builders are continuing to respond to affordability concerns with incentives rather than deeper price cuts.

Regional Developments

The housing market continues to show signs of cooling in former pandemic hotspots. In data released yesterday, the median home-sale price declined year-over-year in 11 of the 50 largest U.S. metro areas-the most widespread drop since September 2023. The steepest declines were observed in San Antonio (-3.7%), Oakland (-3.5%), and Jacksonville (-2.2%), with additional price drops in Phoenix, Austin, Dallas, Orlando, Sacramento, Fort Worth, Portland, and Nashville. This pattern suggests a significant market reset is underway in the Sun Belt region that previously saw exceptional growth.

In the West, existing-home sales fell 9.4% month-over-month, the largest regional decline nationwide, according to data released in the past 24 hours.

Sources

This newsletter is for informational purposes only and should not be considered as financial advice.