Overstocked Market Opens Door for Buyers

New-home sales in the U.S. dropped sharply in May 2025, falling 13.7% month-over-month and 6.3% year-over-year. Meanwhile, inventory has surged to 507,000 homes—equal to a 9.8-month supply. This cooling market offers opportunities for buyers to negotiate better deals, while sellers must rethink pricing and strategy in an increasingly competitive environment.

Housing Market Cools Sharply in May

The latest data from the U.S. Census Bureau highlights a significant shift in the national housing market. In May 2025, new-home sales dropped 13.7% from the previous month and 6.3% compared to the same time last year. This sharp decline is accompanied by a surge in available inventory, now totaling approximately 507,000 unsold new homes across the country. This figure translates to a 9.8-month supply—far exceeding the 5-6 months typically considered balanced for a healthy real estate market. The oversupply points to a market that is no longer dominated by rapid turnover or bidding wars. Instead, the pace is slowing, and many areas across the U.S.—particularly in the South and West—are seeing growing numbers of listings staying active longer, with price reductions becoming more common. This shift marks a clear departure from the red-hot seller’s market of the past few years and opens a new chapter for both buyers and sellers.

Buyers Regain Negotiating Power

With more inventory on the market and fewer immediate offers, buyers now have the upper hand in many transactions. The fierce competition and urgency that characterized much of the pandemic-era market have cooled, giving prospective homeowners more breathing room and the ability to negotiate on price and terms. Builders, anxious to move unsold inventory, are sweetening the deal with a variety of incentives. These include temporary mortgage rate buydowns, complimentary upgrades such as premium appliances or landscaping packages, and even contributions toward closing costs. For buyers who had previously been priced out or discouraged by limited availability, this represents an excellent opportunity to re-enter the market on more favorable terms. It’s also a chance to make more informed decisions without the pressure of bidding wars or waived contingencies. Working with experienced real estate professionals can further enhance a buyer’s advantage by identifying the most motivated sellers and securing optimal pricing.

Sellers Face a New Set of Challenges

For sellers, particularly those listing in areas with high volumes of new construction, the current market requires a fundamental change in strategy. Pricing a home too aggressively in today’s climate can lead to weeks—or even months—of stagnation, eventually forcing painful price cuts to generate interest. Homes are sitting on the market longer, and buyers are more selective, often demanding move-in-ready properties or discounts for any necessary repairs. Sellers must invest more effort into preparing their properties for sale, which can include staging, photography, minor renovations, and a greater reliance on targeted online marketing. In some regions, open houses that once drew crowds are now quieter affairs, reinforcing the importance of a competitive asking price. Moreover, private sellers may now find themselves competing directly with homebuilders who have the scale and flexibility to offer better deals and incentives. To stay competitive, individual sellers may also need to offer buyer credits or flexible closing timelines to close deals in a cooling environment.

Mortgage Rates and Economic Headwinds

Despite a modest decline in mortgage rates—currently averaging 6.77% for a 30-year fixed loan—affordability remains a pressing concern for many would-be buyers. Elevated interest rates, combined with historically high home prices, have eroded purchasing power. For example, a buyer securing a $400,000 mortgage at today’s rate would face monthly payments that are several hundred dollars higher than just a few years ago. Meanwhile, inflationary pressures continue to affect household budgets, contributing to consumer hesitation in making large financial commitments. On the supply side, builders have spent the past two years accelerating construction projects in response to pandemic-fueled demand and limited housing stock. Now that demand is cooling, these homes are entering the market at a time when fewer buyers are actively searching. This mismatch between supply and demand, especially in suburban and newly developed areas, is further contributing to the buildup of unsold inventory and a softening of home prices in previously hot regions.

A Market Reset, Not a Crash

It’s important to note that while the slowdown is real, it does not signal a market crash. Rather, it appears to be a long-anticipated correction following years of rapid appreciation, low interest rates, and historically low inventory. The market is rebalancing—shifting away from the frenzied pace of 2020–2022 and moving toward a more sustainable, normalized environment. Buyers now have time to conduct thorough inspections, evaluate financing options, and negotiate terms without fear of losing the home to a higher offer within hours. Sellers, in turn, must recalibrate expectations and understand that success in this market depends on flexibility, preparation, and realistic pricing. While appreciation may slow or flatten in the short term, long-term fundamentals—such as job growth, demographic demand, and regional economic resilience—still support healthy housing activity in many areas. Those who approach the current market with patience and strategic thinking will be best positioned to benefit from its evolution.

Conclusion: Adapt to the Shift

May’s housing data confirms a new phase in the real estate cycle—one where buyers gain leverage, and sellers must adjust tactics to remain competitive. With nearly 10 months of inventory available and sales volume shrinking, the balance of power is shifting. Buyers should seize this moment to explore options and negotiate value, while sellers must rethink their approach to pricing, marketing, and flexibility. Whether entering the market to buy or sell, success in 2025 will depend on staying informed, agile, and grounded in today’s reality rather than yesterday’s momentum.

Kimberly Habermehl

Premier Town & Country Realty

287 San Marcos Trail New Braunfels, TX 78132

Email: kimshomes@yahoo.com

Phone: (210) 315-5583, 210-315-5583

For true ‘Southern Hospitality’ and over 30 years in the business of helping families buy and sell homes along with relocating families across the United States and overseas, Kim Habermehl is the one to help you and your family. Priding herself in developing friendships with all of her clients, she has maintained a huge following of satisfied clients. Dependability and loyalty are her motto.
Becoming a Broker and opening up her own company, she has been able to hand-pick a small group of Realtors who have the same integrity and ethics as herself to assist anyone who chooses to have Town & Country Real Estate as their preferred real estate company.

Licensed in 1996 w/The Texas Real Estate Commission
License #0449903
Licensed in 2017 w/The Florida Real Estate Commission
License #BK3393534
TREC Licensed Instructor

* Accredited Luxury Home Specialist
* Real Estate Divorce Specialist
* Pricing Strategy Advisor
* Resort & Second Home Specialist
* Real Estate Negotiation Expert
* Texas Affordable Housing Specialist
* Military Relocation Professional
* Texas Real Estate Leasing Specialist
* Certified BPOR
* Home Staging Expert
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