Recent Headlines vs. Real Data

Headlines aren’t wrong: They are out of context.

You may have heard about a decline in home sales, which can strike a bit of fear in homeowners or prospective homeowners’ hearts. It’s true—pending home sales reported a drop of 6.3% in April, according to the National Association of REALTORS®. Of course, home sales fluctuate throughout the year, but that’s unusual for late spring, typically one of the busiest seasons in real estate. By May, reports noted that 21 states across the country were experiencing real estate softening (see here for map). But as with most statistics—and perhaps especially this one—context is essential. It sounds grave, but the underlying dynamics tell a more layered story, one homeowners and prospective homeowners need to know.

Zooming Out: Year-Over-Year Growth Still Strong

Stepping back to look at the year-over-year picture, rather than monthly fluctuations, we see quite a different sorry that despite the month-over-month, home values continue to grow in 29 states. The Case-Shiller Index reports a 3.4% national year-over-year increase, with even stronger gains in urban areas. Similarly, the FHFA House Price Index shows a 3.7% annual appreciation for homes purchased with conventional mortgages. It’s important to note, these are national averages; the story varies from market to market even within states and cities that may report a decline. They questions is, a decline is what? Let’s not forget that new and existing homes are often lumped together in broad data sets, which muddies the picture.

New Home Construction Down: Supply Chain and Rates, Not Demand, Are the Driving Issues

Meanwhile, building starts are down 11%, driven in part by tariffs on imports—particularly from Canada, a key source of lumber. But let’s be clear: builders aren’t slowing down because we’re overbuilding. They’re slowing down because rates haven’t come down as quickly as expected, the cost of tariffs remains unclear (and could blow out a building budget), and existing homes remain more competitive in many markets compared to the cost of building. Builders weigh the risks of building, driven by margins not solely on desire of buyers to buy. Desire only translates into demand when the market can bear it, meaning people can afford it and at an acceptable profit margin for builders.

Existing Homes Soften: It’s Breathing Room, But Not “a Buyer’s Market”

The existing housing market (homes already built) is down less than a percent—a minimal shift, offering just enough breathing room to soften an overheated sellers’ market. But it’s nowhere near what we’d call a buyers’ market. Why?

Sentiment and Supply: Two Powerful Forces at Play

Two key dynamics stand out.

First, consumer sentiment. Confidence in the economy is down, and that matters. With rates on the higher side than people are accustomed to in recent years, people operating at the top of their affordability range are thinking twice. What we’re seeing is lack of confidence. That is playing out in a slight uptick in inventory after years of scarcity and intense competition. This gives the short-term appearance of a softening market and normalizing inventory. But that isn’t exactly accurate, first of all, because inventory is still quite below pre-pandemic levels. If rates dip even one percent, which Fannie Mae is expecting by the end of the year, that minimal wiggle room will vanish quickly.

Many would-be buyers are turning to temporary options—like renting or sharing homes with friends. When they feel confident and affordability ticks up, a whole new wave flood the market. They simply don’t feel confident yet. Or rates have not been low enough to stimulate affordability. But they will.

Second, let’s look at demographics. In the next two years, 4 to 5 million new first-time homebuyers are expected to enter the market, based on the average age of first-time buyers. The number of new homes projected to be built over the same period? Fewer than 3 million. Contrary to popular belief, homes are not being overbuilt—they aren’t being built fast enough to keep up with population needs. This puts additional pressure on existing housing stock.

Regional Shifts: Pandemic Boomtowns, Post-Pandemic Realignment

Let’s also address the 21 states reporting softening. Places like Texas, Florida, and Colorado—hot markets during the pandemic because of the lower regulation and lower taxes in combination with the surge in remote work. Builders raced in. But now, as tech jobs retreat and workers are called back to offices, we’re seeing a cultural shift again. That’s a reminder: markets are not purely influenced by the economy—but also shaped by cultural trends towards or away from major metropolitan markets and appeal of state tax structures.

Tight Inventory, Ongoing Need if Not Demand

Simply put, inventory is still tight. While listings have increased slightly, national inventory remains far below what we’d consider a balanced market. Thought 21 markets broadly speaking have seen a shift, 29 states are holding steady—or continuing to see growth, even if not at the double-digit pace of the pandemic years. Many homes are still receiving multiple offers. That tells us demand is still present—it’s just more selective.

How to Buy Smart in Today’s Market

What does it mean to buy smart? It means buying with a long-term mindset. That can take two forms:

1. Buy a home you love. Even if it doesn’t offer quick equity growth, it enhances your quality of life and fits within your budget. That extra cost per month buys you time, stability, and joy. Statistically, homeowners come out ahead over the long haul. Always.

2. Buy a home with potential. Look for overlooked properties with untapped value. These “paint and paper” homes often sell below market because they weren’t staged, updated, or were listed in a hurry. If you’re willing to wait out the market and add value, these can yield strong returns.

Keep in mind the statistic: Homeowners on average have 40 times the net worth of renters.

Real Estate Is Still One of the Safest Long-Term Plays

The long-range outlook remains favorable. Yes, the market will go up and down—just like the economy. But real estate, historically, has been one of the most reliable paths to financial stability.

As Warren Buffet famously said:

“Be fearful when others are greedy. Be greedy when others are fearful.”

The best time to buy is often when fear is high and competition is lower. If the time is right for you and you can afford it, maybe now is a better time than you realize to buy. It’s all about assessing the local market accurately and your investment options. One great thing about a solid purchase over time (desirable area, up and coming area, or a property with upgrade equity potential), you don’t have to be a stock market guru to win. It’s a stable good bet.