The Pendulum Is Accelerating
May 15, 2025
Market Trends
May 15, 2025
Market Trends
Volume 1: Issue 004 | Read Time: 4 minutes
Happy Friday!
As you know, my ongoing goal is to provide you with relevant information and perspective about our housing market so you can make the best decisions possible when the time comes.
However, from time to time, a topic will pop up that may not be market trend-related but is important enough for you as a homeowner, that it deserves some attention. In this case, fraud and scams targeting homeowners are on the rise in our area so I put together an article for you describing what to be on the lookout for and some suggestions for how to protect yourself. You can check it out here: The Biggest Scams Targeting Homeowners in 2025.
Going forward I’ll occasionally be posting additional articles to our blog to cover these types of topics. You can find them, along with all past issues of Market Trends, on the Articles page of our website.
With that, let’s dive in to this month’s trends!
Most indicators right now show the same story - the pendulum is swinging towards a buyer’s market.
Seasonal trends are on track as expected but they seem to have shifted a month earlier in the typical cycle. The most noticeable is that the number of new listings which came on the market in April surpassed the peak 2024 level which occurred in May of last year. According to what I’m seeing so far this month (and what I’m hearing through the grapevine) May’s new listings this year will likely set a new high score for 2025.
From an inventory standpoint, this is actually a trend we’ve been hoping for. Since before COVID we’ve experienced historically low inventory levels which have contributed to the sharp increases in housing prices making it difficult for many people to get into the market or make the lifestyle-fit transitions we’re used to seeing. The challenge with the timing of the increased inventory is, of course, that interest rates are still elevated and overall market volatility is continuing to suppress buyer activity. My crystal ball prediction is that we will likely swing past a balanced market and find ourselves in a buyer-friendly market fairly quickly. Here’s why:
As a statistic, this is simply the percentage of homes on the market which are under contract with a buyer at the end of the month which helps us identify changes in buying activity as close to in real time as possible. Since it is a percentage, interpretation of its value requires us to analyze it in the context of another statistic, such as the number of new listings, for it to be helpful in discerning trends. For example, if the number of new listings increases month-over-month and the under-contract percentage also increases, we know that more buyers are writing contracts which can be good news for sellers.
It can also be a thermometer of buyer activity. If we see a drop in the number of new listings at the same time as the under-contract percentage is rising, it may signal that we need increase our urgency and the competitiveness of our offers.
I mentioned earlier that I expect us to shift fairly quickly to a market where buyers have a solid advantage (i.e. there’s significantly more supply than demand). This is because the two stats driving the under-contract percentage are diverging from one another.
At the same time as the number of new listings increased in April, there were fewer homes under contract at the end of April than at the end of March. The typical peak for homes under contract is April so while new listings seem to surpassing their seasonal expectation, the number of buyers writing contracts is starting to decline a month earlier than anticipated.
We’ll be looking at the inventory trends (know as absorption rate) and changes to how long listings are on the market next month to see how this continues to play out.
This month’s market-driven opportunity is one that revealed itself through the course of helping a recent client purchase a condo that was “non-warrantable” meaning there was something about the property that did not meet typical underwriting requirements for loans that are intended to be resold by the originating lender.
In this particular case, we found a condo that was a great fit for my client but the entire condo development was “non-warrantable” due to not having full replacement value coverage for the roofs of the buildings. In 2023, Fannie Mae, one of the largest secondary market purchasers of loans, made it mandatory that owner’s associations carry full-replacement coverage in order for Fannie to guarantee to buy the loan from the originator which is how lenders are able to recapitalize and make another loan to another buyer. The vast majority of lenders won’t lend on properties that don’t meet Fannie’s underwriting guidelines making this condo only saleable to buyers paying cash…until we discovered something.
A local credit union was sitting on a pool of capital they had specifically earmarked for originating residential purchase loans. Since they plan to keep the loans and service themselves, instead of reselling the loan to Fannie Mae or another secondary market purchaser, they’re able to lend on properties that don’t quite meet FNME’s strict underwriting requirements.
Not only were they able to get the loan done, they also had the flexibility to offer the buyer an additional .5% rate reduction as an incentive in return for having his monthly income direct deposited into his credit union account. This creative solution allowed him to purchase the condo that is an incredible fit, with a 30 year fixed rate mortgage which is almost a full point below the going market condo loan rate.
If the trend of low buyer activity continues and rates remain elevated, essentially removing the refinance portion of most lender’s income streams, I’m hoping we’ll begin to see more creative options like this starting to pop up as lenders find creative ways to inject revenue into their mortgage departments. Hopefully it will open a few more doors for people who are self-employed, on fixed incomes, or have unconventional asset and income pictures. Many of these people have wanted to buy or invest but so far, have found it difficult to fit into the very small box that is the “conventional loan” approval process. If you’re curious what might be out there for your specific situation, don’t hesitate to reach out and we’ll see what we can turn up!
As always, if you’re happy where you are, that’s truly the best-case scenario. I’m here to help if and when that changes.
Until next month, be safe, and be well,
Scott