The Cooling Housing Market: Why Delistings Signal a Shifting Trend

The U.S. housing market in 2025 is at a crossroads, marked by a paradox: inventory levels are rising, yet sellers are increasingly withdrawing listings. Recent data from Realtor.com reveals that delistings—homes pulled from the market—jumped 47% year-over-year in May 2025, with year-to-date gains of 35%. This trend, now outpacing inventory growth (up 28.4% year-to-date), signals a shift in buyer and seller psychology. As the market cools, investors must decode what this means for real estate strategies, REITs, and construction equities.

Buyer Hesitancy and Price Rigidity: A Psychological Shift

The surge in delistings reflects a growing disconnect between seller expectations and buyer behavior. Sellers in high-competition areas like Phoenix, Miami, and Riverside, CA, are opting to delist rather than lower prices, even as inventory expands. This rigidity in pricing—despite a 53-day average time on market (up five days from the prior year)—highlights a psychological standoff. Buyers, emboldened by a broader inventory of 28.9% year-over-year growth, are no longer constrained by scarcity. Meanwhile, sellers cling to pre-pandemic pricing norms, creating a stalemate.

The delistings-to-new-listings ratio now stands at 13 per 100, up from 10% in 2024 and 6% in 2022. This suggests that sellers are recalibrating their strategies, choosing patience over price concessions. However, 20.7% of listings in June 2025 saw price reductions—the highest June share since 2016—indicating that the market's equilibrium is fraying.

Inventory Dynamics and Regional Imbalances

The West and South are leading the delistings surge, with Phoenix, Miami, and Riverside, CA, as hotspots. These regions, once red-hot markets, now face oversupply and buyer fatigue. Conversely, the Northeast and Midwest remain tighter, with lower delistings and more seller-friendly conditions. This divergence underscores a regional recalibration of demand, driven by migration patterns, affordability, and local economic conditions.

For real estate investors, this means opportunity lies in regions where supply and demand are aligning. Multifamily and industrial REITs in the Sun Belt, for example, continue to outperform, with occupancy rates above 95% and same-store net operating income rising 5.8% year-over-year. Office REITs, however, are underperforming due to persistent remote work trends and 20.6% vacancy rates, according to UBS analysis.

The Impact on REITs and Construction Equities

The delistings trend has amplified headwinds for Diversified REITs, which face challenges from affordability constraints, high interest rates, and sector-specific vulnerabilities. Office REITs like Vornado Realty Trust have cut dividends or suspended payments entirely, while lodging and retail REITs struggle with weak occupancy and consumer confidence.

In contrast, construction equities are gaining traction as policy-driven projects gain momentum. The One Big Beautiful Bill Act, combined with the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA), is injecting $2.15 billion annually into infrastructure, clean energy, and affordable housing. Firms leveraging Building Information Modeling (BIM), AI, and automation—tools that address labor shortages—are well-positioned to benefit.

Private equity activity in construction has surged, with $14 billion in M&A deals since 2023, as investors target firms with vertical integration in renewable energy and modular housing. For REITs, the outlook is mixed. While industrial and multifamily REITs remain resilient, office and lodging REITs face structural headwinds that may persist for years.

Strategic Positioning for 2025 and Beyond

For investors navigating this shifting landscape, the data points to a strategic pivot:
1. Target Policy-Benefit Construction Firms: Focus on companies with exposure to government programs like the Low-Income Housing Tax Credit (LIHTC) or infrastructure projects. These firms are insulated from housing market volatility and benefit from long-term policy tailwinds.
2. Avoid Overexposure to Office REITs: Allocate a smaller portion of portfolios to REITs, prioritizing industrial or logistics assets with durable cash flows.
3. Leverage Private Equity Partnerships: Invest in construction firms scaling through M&A and technological innovation, particularly in solar/wind and modular housing.

Conclusion: A Market in Transition

The 2025 housing market is a study in duality: rising inventory and falling buyer confidence coexist with policy-driven construction opportunities and resilient industrial REITs. Delistings are not merely a sign of cooling demand but a reflection of psychological shifts in both buyers and sellers. For investors, the key is to align with sectors and strategies that capitalize on these dynamics—prioritizing construction equities with policy tailwinds, avoiding overexposed REITs, and maintaining a long-term view as the market rebalances.

As the NAHB HMI inches toward 33 in July 2025, the path forward remains uncertain. Yet, for those who can navigate the volatility, the rewards in construction innovation and infrastructure growth are poised to outpace the traditional real estate playbook.