April Reveals a Housing Market Under Pressure with Cracks Forming Beneath the Surface Insights| LightBox

Stress fractures are showing in the housing market—and April’s data offers the clearest picture yet.

Single-family housing starts fell 14.2% in March to an annual rate of 940,000 units—the lowest level since July 2024. Total housing starts dropped 11.4%, signaling broader softness across the sector. Rising tariffs, added construction costs, and waning builder confidence are dragging on activity despite slight relief in mortgage rates.

Existing-home sales dropped 5.9% in March to a seasonally adjusted annual rate of 4 million, marking the slowest pace for the month since 2009, according to the National Association of Realtors. The decline was largely driven by mortgage rates, which averaged 6.65% in March. Although that marked a five-month low, rates have since reversed course—climbing to 6.83% last week after posting their largest weekly gain in a year, according to Freddie Mac.

Construction Crunch—The Tariff Fallout

The first jolt came from Washington. Tariffs on Chinese goods have surged to as high as 245%, encompassing a wide range of construction materials, including steel, aluminum, and various finished products.

According to a survey by the Associated Builders and Contractors, 80% of contractors are experiencing rising material costs, and one in five report project delays directly tied to these hikes. Over 40% of firms expect tighter profit margins ahead.

Homebuilders are especially exposed, as roughly 7% of residential construction materials are imported—many from countries now facing steep tariffs. Shares of industrial REIT Prologis dropped nearly 7% following the tariff news, just ahead of a scheduled earnings report and a downgrade from Scotiabank.

“Tariffs are adding pressure to an already strained housing market,” said Manus Clancy, head of Data Strategy at LightBox. “Higher material costs are squeezing builder margins, delaying projects, and complicating land development at a time when housing supply remains historically tight. If trade pressures persist, supply challenges could intensify through the remainder of the year.”

Builders Tap the Brakes

D.R. Horton, the nation’s largest builder, reported a slower-than-expected spring selling season, with net sales orders down 15% year-over-year in the second quarter to 22,437 homes. Order value declined 17% to $8.4 billion.

The company’s results coincided with the release of the April NAHB/Wells Fargo Housing Market Index, which edged up one point to 40. While the slight increase marked a step in the right direction, sentiment remains weak—well below the neutral level of 50—with builders reporting lower expectations for future sales and only modest improvements in buyer traffic.

The April survey also showed that 29% of builders cut prices—unchanged from March—with average reductions holding at 5%. The share of builders using sales incentives rose to 61%, up from 59% the previous month. Elevated construction costs and economic uncertainty continue to weigh on builder confidence.

PulteGroup beat earnings expectations, attributing results to buyer incentives like rate buydowns. Still, CEO Ryan Marshall acknowledged that affordability remains a hurdle. Meanwhile, KB Home missed on both revenue and earnings, cut its full-year guidance, and cited macro uncertainty and stretched buyers as headwinds to spring demand.

Sun Belt Slowdown Signals a Regional Reset

Some of the hottest housing markets of the pandemic era are now showing clear signs of fatigue. During the four weeks ending April 20, the median home-sale price declined year over year in 11 of the 50 largest U.S. metro areas—the most widespread drop since September 2023. The steepest declines were in San Antonio (–3.7%), Oakland (–3.5%), and Jacksonville (–2.2%), with additional price drops in Phoenix, Austin, Dallas, Orlando, Sacramento, Fort Worth, Portland, and Nashville.

Sales activity is cooling across all regions, but most notably in the West, where existing-home sales fell 9.4% month-over-month. D.R. Horton, is pulling back in several Sun Belt metros, citing affordability concerns and declining demand. The company has scaled back land acquisitions and is shifting toward more stable markets as regional demand softens.

“We are moving through that inventory in a lot of the markets and the starts pace has been down,” said CEO Paul Romanowski, adding that inventory availability—not macro conditions—is the key drag on sales this spring. The company’s net new orders are down 15% year-over-year, with the sharpest drops in the South Central (including Texas), Southwest, and Southeast (including Florida) divisions.

Buyer Behavior Is Shifting

Buyer affordability pressures are pushing many away from homeownership and into rentals. Multifamily demand remained strong in Q1 2025, with nearly 102,000 units absorbed nationwide—a 12% increase over the same period last year and about 40% higher than the pre-pandemic average. Effective rents also grew by 2% year-over-year, reflecting steady performance in line with historical norms, according to Cushman & Wakefield. Regionally, the Midwest and Northeast outperformed other areas in rent growth. The Midwest led with a 3.9% year-over-year increase, while the Northeast followed closely with 3.2%. Notably, markets like San Jose and San Francisco are showing signs of recovery, with San Jose experiencing a 4.2% year-over-year rent growth. High mortgage rates, steady wage growth, and a growing number of households delaying homeownership contributed to the surge in rental demand.

At the same time, the for-sale housing market continues to soften. Inventory rose 19.8% year over year to 1.3 million, softening price growth to just 2.7%. In March 2025, 23.5% of active home listings experienced price reductions, the highest share for that month since at least 2018, according to Zillow’s latest market report. This marks an increase from 21.6% in February and 20.6% in March 2024, indicating a trend where sellers are adjusting their expectations amid shifting market conditions.

While pressure is building across housing and construction, the core fundamentals remain intact—for now. What’s emerging is a more fragmented market, with growing divides by region, property type, and buyer strategy. The second quarter will be critical. Builder reactions, investor moves, and the pace of rate cut expectations could all reshape the outlook, especially as policy and regulatory changes continue to ripple through the system.

“The cracks are showing, but the foundation isn’t breaking—yet,” said Clancy. “If economic pressures persist and construction costs stay high, we could see deeper fractures in the housing market by late 2025. For now, it’s a market in transition, not collapse, and smart investors and builders are adjusting in real time.”

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