SPY’s perched near $615. Most are glued to it like it’s the only chart that matters. Meanwhile, real estate is quietly slipping off the ledge. VNQ is sitting around $88.03, down almost 12% from its February top. The move’s not dramatic, but it’s persistent. And that’s more dangerous.
New home sales in May fell 13.7% month-over-month. That’s a drop we haven’t seen since the COVID freeze in 2020. On a year-over-year basis, they’re off 6.3%. Regional pain is spreading:
• South: down 21% • West: off 12.5% • Midwest: down 8% • Northeast: basically flat
Builders are choking on inventory. They’re sitting on 507,000 unsold new homes. That translates to 9.8 months of supply. The 12-month moving average is now the highest since the housing overhang of the post-GFC years.
• Median price in May: $426,600 • Price rise from last year: 3% • Incentives rising across metro markets • KB Home cut its full-year outlook • Lennar cut prices and still can’t move volume
Mortgage rates are frozen near highs. The latest 30-year fixed sits at 6.77%. Jumbo loans are brushing up on 6.9%. First-time buyers are priced out. Existing homeowners don’t want to give up their 2.9% mortgages. Transaction volume is toast. Supply is stagnant. Demand is paralyzed.
REITs are getting squeezed. VNQ is trailing the S&P by over 6%. The breakdown is mechanical:
• Cost of capital is higher • Yield spreads have collapsed • Property valuations are softening • Debt service costs are climbing • Rent growth is stalling in major metros
Meredith Whitney’s warning isn’t hyperbole. She’s flat-out calling 2025 one of the worst housing years in decades. The aging-in-place trend is freezing up existing stock. Over 60% of homes are owned by people over 60. They’re not selling. Retrofitting beats downsizing. The younger cohort can’t get in. That gridlock’s deep.
The Fed hasn’t moved. Powell’s holding firm. Inflation’s sticky, shelter is still elevated in core CPI, and there’s no sign of a policy turn. Equity investors are chasing AI narratives. But housing has already cracked.
Sources:
https://www.realtor.com/news/real-estate-news/new-home-sales-census-data-may-2025/
https://www.census.gov/construction/nrs/pdf/newressales_202505.pdf
https://www.forbes.com/advisor/mortgages/mortgage-rates-06-30-25/
https://finance.yahoo.com/news/housing-market-set-worst-decades-120230840.html
https://www.investing.com/etfs/spdr-s-p-500-historical-data
https://www.investing.com/etfs/vanguard-reit-etf-historical-data