Are We Seeing the First “Bad Economy Sellers” in 15 Years?

The housing market story of the last three years has been interest rates, of course. As mortgage rates rose, home buyer demand slowed. As demand slows, inventory grows. Home sales remain super slow. In 2025 mortgage rates stayed stubbornly high for yet another spring buying season. Potential homebuyers have responded by not buying homes. We base our 2025 housing market expectations on assumptions that if mortgage rates finally shift lower, that will spur demand and the number of home sales transactions will increase. Likewise if mortgage rates jump again, potential homebuyers will feel that and continue to sit on the sidelines.

 But suddenly there are new variables to consider. The macro-economic story is shifting. New policies on trade tariffs, immigration, and reduced spending are all de-growth and have recession talk back on the table. Unemployment is starting to inch higher. We haven’t had unemployment in this country for many years. So the question is how will the housing market change as these economic assumptions change for the first time in a long time?  And, really, how quickly can we measure changes in housing supply and demand as these new conditions take over? For example, the weekly new listings count is starting to rise above the extremely tight levels of the past three years. I’ll share this data in a minute. Are those sellers the first people feeling the new pinch? 

I should be clear. The data is not all bearish. The weekly pending home sales rate is nudging higher along with the new listings. 

We’re only two months into the new government policies. The US economy was strong as we entered the new year and has lots going for it still. These are early shifts in the vibes only. And if you follow my work, you’ll know that we’ve been on recession watch for the housing market for most of the last three years. It’s not new for us to be on recession watch. I’m probably overly focused on it. And the economy kept growing during all that time. We’ll see if the current fears actually materialize. They may not.

But here’s the thing: we’ve been assuming that lower rates increase demand faster than supply. This has been a safe assumption for the last 15 years, because at that same time the economy was growing and unemployment was low. As a result interest rates were the important lever. 

Now if homeowners are sensing the first economic downturn in a long time, do those change impact supply faster than falling rates spur demand? That’s the shift we’re watching for. I’ll show you what I mean when we look at the data below.

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I’m Mike Simonsen, I’m the founder of Altos Research. Let’s look at the data for the week of March 17, 2025. Please refer to the video below for all the charts I mention in this transcript!

New Listings

Let’s start today with the New Listings data. This week saw 68,000 newly listed single family homes. The pace of new listings seems to be picking up finally, for the spring and for the post-pandemic era.  There were nearly 7% more sellers this week than the week prior. And 14% more new listings unsold than last year at this time. In fact there were more new listings unsold this week than any mid-March since 2020, just before the pandemic hit.  The bottom line is that this spring more sellers are trying to sell their homes. 

See the purple line here steadily growing and separating from last years blue line? That’s seller volume steadily approaching the old normal levels of new listings each week. The gray lines are prior years.  There were 68,000 new listings. Last year it was only 59,000. In 2019 there were 74,000. So it’s not a lot of sellers, but we’re breaking from the post-pandemic shortage. 

What is driving the seller behavior? Is it economic vibes? Is it pent up “shadow” inventory for people who’ve delayed moving for three years? 

Keep in mind that seller volume has been very low for nearly five years. Essentially every homeowner in the country has an ultra cheap mortgage which no one wants to get rid of. But now three years after mortgage rates started climbing, there are a few million home owners who do not have ultra cheap financing. Those owners are more likely to sell. If it’s more expensive to hold, we are more likely to opt to sell. So over time as long as rates stay high, we slowly emerge from the mortgage rate lock-in.  That means more sellers just with time.

On the other hand we have the vibes shift. The DC Metro economy seems likely to be on the downswing, new listings rate is climbing in DC. It’s not super high, but maybe the shift is underway. The DC Metro market alone isn’t enough to move the needle for new listings nationally. There were only 674 single family homes newly listed this week in the entire DC Metro region. That’s up from 601 the week prior. It’s growing, but it’s a tiny fraction of the US.  The reason we pay attention is that it's potentially an example of what could happen in a macroeconomic shift.

That’s why I ask if these are the first of what might be called “bad economy sellers”. Besides a few weeks of that at the very start of the pandemic, essentially we haven’t had a bad economy with unemployment in a decade and a half.  We see these shifts very quickly in the weekly new listings data. Stay tuned.

Inventory

Available inventory of unsold homes also had a pretty big increase this week, climbing 2% to 656,000. While this time of year is totally normal to build inventory each week, that’s a slightly faster build up than we expected. This inventory increase is from the new listings, as I mentioned and demand is still pretty light. It came to 13,000 more single family homes on the market now than a week ago. Last year there were only 5 weeks in April, May and July had inventory gains of more than that in a given week. So this week’s inventory increase is pretty notable.

In this chart I have each line is a year’s inventory curve. The purple line for 2025 ticked up this week. Inventory grew faster this week than the same week a year ago. There are now 29% more homes unsold on the market than last year at this time.  Inventory has been roughly 28-30% greater than the year prior for like 6 months. 

We have been assuming that inventory will keep growing of course, but maybe at a slower pace than 2024. We expect that by the end of the year, there will be maybe 18 or 19% more homes on the market, down from 29% now. If the assumptions in our models hold that means that in the next couple months we should see the gap shrinking. The gap grew this week. If the gap continues to grow, that will be a new signal for the rest of the year. 

That’s what I’m watching for with inventory. We know inventory will continue to grow. But will the gap between 2025 and 2024 continue to expand? Or will it shrink as we previously expected? In this chart watch if the purple line continues to separate above the blue line as we roll into the second quarter. 

Pending Home Sales

That’s the supply side of the equation. Supply is increasing. So it’s critical to know if sales are keeping up. The good news is that the weekly count of pending home sales is climbing for the spring. There were 66,000 single family homes which took offers and started contracts this week. That’s up a nice 4% for the week. 

Home sales are finally just about exactly where we were last year at this time. The purple line in the chart here has been running about 3% fewer sales than in 2024. But the sales momentum might be shifting. Last year in the second quarter mortgage rates were on their way to their most expensive for the year. So sales were slowing at the time. Now maybe we have momentum in the other direction. Mortgage rates are 50 basis points cheaper than they were earlier in the year. 

I’m going to predict that next week’s data shows the weekly pending home sales at slightly above the same week a year ago. I’m just assuming that this would happen because Q2 2024 was really slow. The comparison gets easier for the next quarter. Stay tuned to see if my guess is right.

There are significantly fewer immediate sales happening in 2025. Potential home buyers know they can wait for either the right deal or better financing. So even if sales tick up, the time on market is generally longer and buyers can wait for shifts in rates to jump when the timing is right.

Home Prices

Most of our home prices measures ticked up this week as you’d expect as the spring buying season emerges. The median price for this week’s pending home sales came in just under $390,000. That’s basically unchanged from last week. And it is in fact just about exactly the same median price as last year at this time. 

In this chart we have the median price of the week’s newly pending home sales. $390,000. The purple line is for this year. It’s slowly inching up for the spring. The blue line is last year. I’m expecting a slight bump up in next week’s sales prices so that the trend line stays slightly elevated over last year. The pattern has homes about 2% more expensive than they were selling for in 2024. Just 2%. Barely positive. As supply grows and as mortgage rates stay mostly elevated, I don’t see any catalyst for home prices to grow any more than that. In fact, I’ve mentioned that I’m on the lookout for negative pricing pressures. There aren’t signals of home price declines but they’re basically flat from 2024.

Meanwhile the median price of the active listings is $439,000 now. That’s up almost 1% for the week with the spring and is also nearly 1% greater than last year at this time. By almost every measure, home prices are essentially unchanged for a year, just slightly higher. The active market is up 1%, the weekly pendings were unchanged. 

The thing to watch for in home prices is whether any of these turn negative with increased supply. If mortgage rates were to jump, I’d expect prices to correct down. I started today discussing new economic vibes. It’s far too early to see those vibes in sales prices. We’re first watching for the impact of the vibe shift in supply numbers. Prices come later.

Price Reductions

Let’s wrap with the leading indicator of future home sales prices, the price cuts. This is the percent of homes on the market with price reductions from their original list price and it moved up this week to 34%. So 34% of the homes on the market have taken a price cut from the original list price. That’s a pretty substantial number for mid March. That tells us that there is no turnaround in demand. Which I suppose is obvious. It implies that future sales prices will continue to have no upward pressure. 

In this chart you can see how the 2025 pricing pressures are elevated over March of any recent year. You can also see the fall of 2022 was the most pressure. The price cuts in November 2022 led to year over year home price declines in the spring of 2023. So this is a 4-6 month leading indicator of future sales prices. 

It’s natural for price cuts to accelerate in the spring. Any home listed in March without offers in April will start to consider a price cut. So two things matter here: the absolute level of price cuts, which is high now, and the speed at which listings are cutting. 2022 had both changes. This year is slightly more subtle. The key takeaway for the price reductions data is that there is no bullish signal for home prices in the coming months. 

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