Is the Red Warning Light Flashing on the Housing Market?

The U.S. housing market is flashing mixed signals as we move deeper into 2025. Data released by the National Association of Realtors (NAR) for March indicates continued strain in home sales and affordability, even as inventory begins to shift. Rising interest rates, pricing pressure, and buyer hesitation are reshaping the market dynamics—not just nationally, but right here in Chicagoland.

National Market Snapshot: March 2025

Existing-Home Sales
In March, existing-home sales dropped 5.9% from February, down to a seasonally adjusted annual rate of 4.02 million units. Compared to March of 2024, sales are down 2.4%, making this the slowest March since 2009.

Median Price
Despite fewer transactions, prices continued to rise. The median price of an existing home hit a record $403,700, up 2.7% year-over-year.

Inventory
The national inventory of unsold existing homes grew to 1.33 million units—an 8.1% increase from February and up nearly 20% from a year ago. While this might seem like progress, it still represents only a 3.2-month supply at the current pace of sales.

Time on Market
Homes are sitting a bit longer, averaging 36 days on market, compared to 29 days a year ago.

Interest Rates and Affordability

The average 30-year fixed mortgage rate reached 6.83% by mid-April. Higher rates continue to reduce affordability, putting more homes out of reach for first-time buyers and keeping monthly payments elevated. According to NAR, rates are expected to average around 6% through the remainder of 2025.

If interest rates drop, mortgage rates would likely follow. This could make homes more affordable for millions of buyers—but it’s a double-edged sword. Lower mortgage rates can push more buyers into the market, which can drive prices even higher and worsen affordability if inventory remains low.

NAR March 2025 Key Highlights

• Existing-home sales down 5.9% month-over-month

• Median price hit a record $403,700

• Inventory grew to 1.33 million homes

• First-time buyers made up 32% of purchases

• All-cash sales declined to 26%

• Average days on market increased to 36

• Price reductions and seller concessions became more common

The Chicagoland Market: What You Need to Know

Existing Homes
As of early 2025, the median sale price for existing homes in the Chicagoland area was around $327,250. Homes spent an average of 31 days on the market. Just over a quarter of sales (27.8%) closed above list price, while nearly 60% sold below.

New Construction
Suburbs like Glenview, Naperville, and Northbrook are seeing new construction boost local supply, but high costs and rising rates are keeping many buyers cautious.

Inventory Trends
Chicagoland inventory continues to tighten. As of the end of 2024, the number of active listings was down nearly 25% year-over-year, hitting a record low. Many homeowners are hesitant to sell because they’re locked into mortgage rates well below 5%. Replacing that with today’s 6.8% rate is financially unattractive, keeping homes off the market.

Regional Highlights

Midwest
Home sales in Illinois were up 7% year-over-year in January, with a median price around $285,000. The Chicago metro area saw a higher median of $340,000 and an 8.4% bump in closed sales.

West
Markets are cooling with rising inventory, especially in urban California and Colorado markets.

South
Demand remains high, especially in Texas and Florida, but affordability continues to be a hurdle.

Northeast
A more balanced market with modest price increases and steady buyer demand.

What’s Keeping Sellers on the Sidelines?

Many potential sellers are holding off due to what’s known as the "golden handcuff" effect—homeowners don’t want to give up their ultra-low mortgage rates. Unless rates drop significantly, inventory is likely to remain below normal levels. Without more listings, competition stays high, especially for entry-level homes.

Final Thoughts on Affordability and Outlook

Affordability remains a core issue. Rising prices and higher mortgage rates are pricing out many buyers, especially first-timers. A cut in rates could improve affordability, but it might also heat up demand faster than inventory can respond. The market needs a balance: more listings, stable rates, and slower price growth to bring back long-term sustainability.

Frank “Campo” Campobasso
Century 21 Circle
773-425-6265

ABOUT FRANK CAMPOBASSO
With over 20 years of industry experience, Frank Campobasso is a seasoned real estate expert known for marketing single-family homes, townhomes, condos, multi-unit buildings, and investment properties. He is also a highly successful buyer’s agent, known for helping clients navigate competitive markets and secure the right home at the right price. Dedicated to achieving outstanding results, Frank prioritizes customer satisfaction, ensuring that his clients’ homes sell quickly and for top dollar. His expertise in pricing, preparing, and showcasing listings has earned him recognition in leading real estate magazines, newspaper articles, and radio programs. If you’re ready to buy or sell your home with expert guidance, call Frank at 773-425-6265 to schedule a personalized in-home consultation.