March 2025 Housing Market Insights for Homebuyers and Sellers

The March 2025 housing market reveals a complex but telling snapshot of today’s real estate environment. With declining existing home sales, a modest rise in new home purchases, falling housing starts, and a drop in mortgage applications, both buyers and sellers face a challenging landscape shaped by economic uncertainty and fluctuating interest rates.

For residents of Chicago and surrounding communities, these national trends mirror what many see locally—limited housing inventory, affordability barriers, and slower market momentum compared to previous years. However, understanding this data offers valuable insight into how to prepare for a real estate transaction in today’s environment. Whether you're a first-time homebuyer, a move-up seller, or an industry professional, recognizing the implications of these shifts can help you make informed decisions.

Existing Home Sales Decline Despite Buyer Demand

March 2025 marked another decline in existing home sales, with transactions falling 5.9% from February and 2.4% year-over-year, according to the National Association of Realtors. That translates to a seasonally adjusted annual rate of 4.02 million homes sold—the lowest since January. NAR Chief Economist Lawrence Yun noted that "residential housing mobility, currently at historic lows, signals the troublesome possibility of less economic mobility for society." In simpler terms, fewer people are moving, and that’s having a broader effect on the economy.

The key driver behind the slowdown continues to be affordability. With mortgage rates hovering near 7%, many would-be buyers are either priced out or choosing to wait. This cooling of demand places downward pressure on prices in some markets, but hasn’t led to dramatic corrections due to persistently low inventory levels.

In Illinois, especially in areas like Cook and DuPage counties, tight supply is still the norm, which can frustrate buyers while giving sellers the upper hand—if they’re willing to list. For those looking to buy or sell in 2025, strategic timing and professional guidance are critical. Working with an experienced title company ensures a smooth transaction, especially in a high-stakes market like Chicago.

New Home Sales Show Growth but Reflect Pricing Pressure

While existing home sales declined, the March 2025 housing market showed positive momentum in new residential sales. According to the U.S. Census Bureau and HUD, new single-family home sales rose to a seasonally adjusted annual rate of 724,000 units—a 7.4% increase from February and a 6.0% increase from one year earlier.

However, that growth came with a significant drop in median sales price. In March, the median price for a new home was $403,600, down 7.5% from March 2024. This decline signals that builders may be offering more competitive pricing to attract buyers in a market constrained by high borrowing costs.

In regions like suburban Chicagoland, new construction continues to appeal to buyers looking for modern amenities and energy-efficient designs. Yet these purchases still come with challenges—zoning restrictions, longer closing timelines, and limited inventory in certain price bands. Buyers seeking affordability may find some relief in the new home market, especially as builders increase incentives.

This growth, though encouraging, is also an indicator that builders are adapting. They're recalibrating floor plans and amenities to meet buyers where they are financially. Whether you’re purchasing a newly constructed home or one that’s move-in ready, title insurance is essential to protecting your investment.

Housing Starts Plunge as Affordability Concerns Mount

Despite growth in new home sales, March 2025 housing market data shows a sharp decline in overall housing production. According to the National Association of Home Builders, total housing starts dropped 11.4% from February, falling to a seasonally adjusted annual rate of 1.32 million units. Single-family housing starts were hit hardest, plummeting 14.2% for the month and down 9.7% year-over-year.

This decline highlights growing concerns about construction costs, skilled labor shortages, and elevated mortgage rates. NAHB Chairman Buddy Hughes remarked, “Elevated mortgage rates and rising construction costs are making it increasingly difficult to deliver homes at price points accessible to entry-level buyers.”

For the Midwest—including Illinois—housing starts were actually up 3.3% year-to-date. However, this increase masks underlying concerns, particularly in urban areas like Chicago, where land use policies, rising material costs, and permit delays challenge developers.

Fewer housing starts today mean less inventory tomorrow. For consumers, this trend could limit options and place additional upward pressure on prices later in 2025. For real estate professionals and lenders, it underscores the importance of proactive planning and working with reliable partners to expedite closings and mitigate transaction risks.

Mortgage Applications Drop as Rates Hit Two-Month High

The mortgage market added another layer of complexity to the March 2025 housing market. The Mortgage Bankers Association reported that total mortgage application volume fell 12.7% for the week ending April 18. Purchase applications dropped 7%, while refinancing activity plummeted 20%—largely due to rising rates.

The average 30-year fixed mortgage rate climbed to 6.9%, the highest in two months. With higher interest rates, borrowers are increasingly hesitant to apply, especially those with higher loan amounts. MBA Vice President Joel Kan emphasized that “economic uncertainty and rate volatility impacted prospective homebuyers,” noting a noticeable dip in both conventional and government-backed loan activity.

In Illinois, these rate hikes are especially impactful in high-cost areas like Chicago’s North Shore or the western suburbs, where home prices tend to exceed national averages. With the cost of borrowing rising, potential buyers must reassess their budgets and expectations. Sellers, meanwhile, may face smaller buyer pools and longer listing times.

Navigating rate volatility requires strategic planning. Buyers can benefit from rate locks and pre-approval processes, while sellers may need to negotiate more creatively. A title insurance provider can ensure that once a buyer and seller agree, the transaction closes securely and without delays.

Making Sense of the March 2025 Housing Market

The March 2025 housing market illustrates a delicate balancing act: demand remains strong, especially for affordable new homes, yet affordability continues to deteriorate due to high rates and construction costs. Existing home sales fell despite buyers actively searching, while builders saw some success in moving inventory, but only by lowering prices. Meanwhile, housing starts and mortgage activity both declined, reinforcing the cautious outlook among developers and borrowers.

In Illinois and throughout the Chicago metropolitan area, these national trends are playing out with local nuances. Some neighborhoods are seeing increased new construction, while others remain hampered by low listing volumes and stagnant pricing. For anyone navigating today’s market—whether purchasing, selling, or refinancing—it’s more important than ever to work with professionals who can provide clarity and reduce risk.

Plymouth Title Guaranty Corporation offers trusted guidance and comprehensive title insurance and escrow services tailored to your needs. If you’re planning a real estate transaction in today’s evolving market, contact us to learn how we can help you close with confidence.