The U.S. housing market is starting to exhibit signs of a cyclical downturn, amidst a macroeconomic landscape of elevated job market uncertainty and tight mortgage credit availability. After years of rapid price appreciation and limited inventory, recent data indicates a moderation in home prices and an increase in available listings. These developments suggest that the market may be transitioning from persistent affordability challenges (and a seller’s market) to a more balanced state.
One notable indicator of this shift is the change in home prices. In March 2025, the S&P CoreLogic Case-Shiller 20-city index reported a 0.12% decline in home prices, the first monthly decrease in over two years. While prices remain higher on a year-over-year basis (4.07% Y-Y), the deceleration points to cooling demand amid affordability challenges and economic uncertainty. Concurrently, inventory levels of single-family (new and existing) and multi-family homes are rising. For example, the inventory of existing homes for sale rose by 20.8% Y-Y in April 2025, reaching 1.45 million units, the highest level since 2020. Lastly, building permits, a leading indicator of housing activity, fell 4.7%.
Nonetheless, the market’s trajectory is not uniform across all regions. Certain areas, particularly in the South and West, are experiencing more significant price reductions and inventory increases, while markets in the Northeast and Midwest remain relatively tight. Should economic conditions lead to a recession, mortgage rates may decline more materially as the Fed cuts rates; potentially easing the “lock-in effect” from low-rate mortgages (2-3%) secured in 2020-2021. Such a scenario implies an increased supply of homes and thus a moderation in home prices.
In conclusion, the U.S. housing market is starting to show signs of a cyclical downturn, driven by rising single-family and multifamily inventories. However, the cyclical turning point is uneven, with regional supply-demand imbalances preventing a broad-based break from the past decade’s trends. From an investment perspective, we remain cautious on homebuilders due to elevated new home inventories, sticky cost pressures and diminishing pricing power as existing home inventories gradually re-enter the market.
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This material represents an assessment of the market and economic environment at a specific point in time. It is not intended to be a forecast of future events or a guarantee of future results.
Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices does not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.
The S&P CoreLogic Case–Shiller Home Price Indices are repeat-sales house price indices for the United States. There are multiple Case–Shiller home price indices: A national home price index, a 20-city composite index, a 10-city composite index, and twenty individual metro area indices. These indices were first produced commercially by Case Shiller Weiss. They are now calculated and kept monthly by Standard & Poor’s, with data calculated for January 1987 to present. The indices kept by Standard & Poor are normalized to a value of 100 in January 2000.
