Overview: The Housing Market in May 2025
In May, the economy continued to send mixed signals amid uncertainty surrounding the impact of tariffs on prices. On one hand, inflation increased modestly, leading the Federal Reserve to keep the Federal Funds Rate unchanged until the inflation rate is contained or falls below the 2% target. On the other hand, the labor market continued to add jobs, and the unemployment rate remained stable.
Rents, which account for over one-third of the Consumer Price Index, continue to exert upward pressure on overall inflation, rising at a significantly faster pace than the overall index.
Despite this, both existing home sales and contract signing activity increased in May. The summer is typically a busy season in the real estate market, coinciding with school breaks that provide families with the flexibility to make major moves. In addition, the Mortgage Purchase Index, which increased that month, signaled that market activity is expected to pick up even more next month. This is mainly due to stability in the job market and sustained wage growth, which are sufficient to encourage some buyers to enter the market despite the higher rates.
In June 2025, the upper limit of the Federal Funds Rate remained at 4.5%. Although the Federal Reserve began cutting the short-term rate in September of 2024, inflation continued to rise above its target. Consequently, the Fed announced that it would maintain a rate range of 4.25%-4.50% until inflation decreases.
In May, 139,000 jobs were added to the U.S. labor market, roughly in line with the average monthly gain of 149,000 over the prior 12 months. That month, job growth continued to trend upward in healthcare, leisure and hospitality, and social assistance. The Federal government continued to lose jobs while the real estate industry rose by 4.2% in jobs.
May's inventory of unsold listings was 1.54 million units, up 6.2% from April and 20.3% from one year ago. The current unsold inventory is equivalent to a 4.6-month supply at the current sales pace, up from 4.4 months in April and 3.8 months in May 2024.
In May, privately owned housing starts decreased to a seasonally adjusted annual rate of 1.26 million. This increase is 9.8% below the revised April 2025 estimate and 4.6% below the May 2024 rate. Single-family housing starts were at a rate of 924,000 that month, up 0.4% from the previous month.
Respectively, another measure of housing construction, building permits issued, decreased to 1.39 million in May. The decrease was 2.0% below the revised April 2025 estimate and 1.0% below the May 2024 rate. Single-family permits were at a rate of 898,000, down 2.7% from April.
