March 2025 saw a pause in U.S. home price growth and a surge in housing inventory during what is traditionally one of the most competitive months for homebuyers. Despite mortgage rates hitting their lowest point of 2025, home sales failed to keep pace with the increase in new listings, leaving many potential buyers struggling to keep up with rising affordability challenges.
According to Zillow’s latest market report, more than 375,000 homes were put up for sale in March, marking an almost 9% increase compared to the same month in 2024. Although listing activity remains 19% below pre-pandemic levels, it is steadily rising month-over-month and aligning with typical seasonal trends.
However, despite the increased availability, buyer demand faltered. Newly pending sales were virtually flat compared to the previous year, despite mortgage rates averaging 6.65% in March, a slight drop from 6.82% in March 2024. Only about 265,000 listings went under contract, 110,000 fewer than the number of homes that entered the market.
As a result, overall inventory climbed to 1.15 million homes, a 19% increase compared to last year and the highest level of inventory seen in March since 2020. While inventory is still 24% below the 2018-2019 averages for this time of year, the increase marks a noticeable improvement from the severe shortages seen in March 2023 and 2024, when inventory was down by 43% and 36%, respectively.
This growing inventory, combined with cooled competition, led to a slowdown in home price growth. The typical home value in March rose just 0.2% month-over-month, the slowest growth for this time of year since at least 2018. In comparison, March 2024 saw a 0.7% increase. However, home prices in major Florida markets and San Antonio experienced declines during the month. Nationally, home values showed a modest 1.2% year-over-year increase.
Affordability remains a persistent issue for buyers. In March, the mortgage payment on a typical home required about 35.3% of median household income, even with a 20% down payment. While this marks a slight improvement over the previous year, it still far exceeds the 30% threshold considered financially burdensome. A 20% down payment on the typical U.S. home amounts to approximately $72,000.
In response to slower sales, sellers adjusted their strategies, with more than 23% of listings receiving price cuts in March–the highest percentage for any March since at least 2018.
Zillow Chief Economist Skylar Olsen highlighted the ongoing struggles for first-time buyers, who are particularly vulnerable to affordability pressures in today’s uncertain economic environment. “More sellers came out to test their luck as rates ticked down in March, but home sales didn’t keep up. Buyers–especially first-timers without equity to pour into their down payment–continue to struggle with affordability and now are facing even higher levels of uncertainty,” Olsen said. “A turbulent economy likely weighs more heavily on first-time buyers than more firmly established sellers.”
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