By Shaina Mishkin

This spring hasn't been the strong selling season real estate agents and home builders were hoping for. Instead, subtle shifts in the market point to more weakness for sales and softer prices for buyers.

At first glance, there are plenty of similarities this spring with last year: Prices are still high, and mortgage rates remain above 6%, and are vulnerable to rapid swings. Those two factors could keep a lid on home sales for the third year in a row.

But there are more differences this year than one might think. Buyers and sellers who enter the market should note the following shifts:

Buyers Are More Fearful

Some house hunters who were serious about their searches are backing out of the market in the Dallas area, says Re/Max agent Todd Luong, who works in the region. "This past week, I've got two potential clients who have already put things on hold," he says. "I have a feeling there are probably more people out there that are feeling the same way."

Slow sales are nothing new. Existing-home sales dropped to the lowest levels since the mid-90s in both 2023 and 2024, according to National Association of Realtors data. But consumers have become more negative about job security, adding a headwind to the cost barriers and relatively low inventory that weighed on transactions last year.

"People who are kind of antsy about losing their job are not going to want to put down hundreds of thousands of dollars on a new home," Joel Berner, a senior economist at Realtor.com, previously told Barron's. ( News Corp, which owns Barron's, also owns Realtor.com operator Move.)

That shift in sentiment is having a real impact on companies that build and sell homes. D.R. Horton, the nation's largest home builder, on Thursday cut its guidance for the year as it said buyers were more cautious than expected this spring.

Those who are in the market are serious, D.R. Horton executives said on a conference call. Today's buyers have "done their homework, they've likely prequalified with the mortgage company, and they're following through," Executive Vice President and Chief Operating Officer Michael Murray said.

ARMs Are Back

Mortgage rates are still high relative to where they were before the pandemic. Borrowers in search of ways to save have recently turned to adjustable-rate mortgages, or ARMs, to soften the blow.

Nearly one in 10 mortgage applicants during the week ended April 11 sought an adjustable-rate loan, according to the Mortgage Bankers Association -- the largest share since November 2023.

United Wholesale Mortgage, a lender that offers loans through mortgage brokers, "has seen a significant increase in ARMs over the past three months, with further growth expected in April," says Alex Elezaj, the lender's chief strategy officer.

Opting for an ARM can save borrowers significant cash initially. The average interest rate for a 5/1 ARM, which provides a fixed rate for five years and recalculates interest every year after that, was 0.7 percentage point lower than the average rate on a fixed 30-year loan last week, according to the Mortgage Bankers group.

The trade-off is that those payments could move higher after the fixed period ends. That makes ARMs a good option for buyers certain that they will move or refinance before the fixed period is up -- but not as compelling for those planning on staying put for the life of the loan.

Sellers Trim Prices

Listings are headed higher as homes for sale spend more time on the market than usual at this time of year. For those still on the hunt, that means more choices -- and possibly lower prices.

There were about 1.15 million homes on the market in March -- up 19% from last year, and the most for any March since 2020, according to recent Zillow data. There were also more price cuts, the company reported: about 24% of listings reduced their prices, the most of any March since at least 2018. The website's measure of the typical home value inched up 1.2% from the year prior, the slowest such increase since July 2023.

Zillow expects home values will drop 1.9% this year, according to its April forecast. "The combination of rising available listings and elevated mortgage rates is signaling potential price drops by year's end, " the forecast says. "With increased supply, buyers are gaining more options and time to decide, while sellers are cutting prices at record levels to attract bids."

But national numbers don't tell the whole story, notes Leo Pareja, the CEO of brokerage eXp Realty, noting that housing market trends are "hyper-local" this year. Pareja suggests buyers and sellers check a metric called months of supply. It's a measure of supply and demand showing how long it would take to sell every home on the market at the current sales pace. This information can be found on local Realtors' board websites, in data portals like those available on Zillow and Redfin, or by asking an agent. As a rule of thumb, more than six months of supply is a buyer's market, he notes, while sellers have the power at less than six months.

"Because it's such a localized tale, it is confusing to the consumer," he says, noting that inventory has risen in some parts of the country more rapidly than in others. "A seller selling in southwest Florida who has a sibling, coworker, or friend [selling] in New Jersey could be having completely different experiences."

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 20, 2025 01:30 ET (05:30 GMT)

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