Did Home Sales Momentum Fizzle in December?

The New Year’s week was expected to be slow, so it’s no surprise that new listings and sales are down. Those will start rebounding in next week’s data.

The Christmas and New Year’s holidays fell on Wednesdays this year, which messes up two full weeks in terms of getting home sales done and tracking the numbers. At the same time, mortgage rates jumped back over 7%.

For the four December weeks in 2024, there were just 44,000 new pending home sales on average for single-family homes. In 2023, that average was just under 44,000 per week. There are still about 5% more homes in the pending sales pipeline than last year. I assume you’ve been hearing that recently, with the headlines reporting growth. When the December numbers come out from the traditional sources, they’ll still report sales gains. It takes 30 to 45 days in the sales process before the sales close. What we’re trying to track is what the real-time signals are telling us about homebuyers and 7% mortgage rates.

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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 January 6, 2025. Please refer to the video below for all the charts I mention in this transcript!

Inventory

Let’s start with the active inventory of homes for sale. There are 635,000 single family homes unsold on the market now. Inventory falls quickly over the holidays of course, this week has 2.4% fewer homes on the market than a week ago.  Most years have a little increase in inventory during the second week of January. I expect that next week, but then a dip again later in the month. There’s not a lot of new listing volume early in the year. In “normal” years, it’d be early February before inventory hits the absolute low point and starts climbing for the spring. When demand was hot during the pandemic, inventory might not reach its low point until March or April. In those times we just had far more buyers than sellers. That’s not true now, so we should expect inventory to begin building for the year in February 2025. 

What other signals do the current inventory levels reveal? Well there are 27% more homes on the market now than a year ago. Since we’re entering the year with mortgae rates over 7% that’s gotta put a damper on purchase demand. So if inventory starts building consistently in January, earlier than normal, that will tell us a lot about the upcoming year. 

The total number of unsold homes on the market to start 2025 is just 18% fewer than at the start of 2018, seven years ago. In this view of the last 10 years of inventory trends, I’ve higlighted 2018. The data illustrates a couple important learnings. First, in the last decade you can see how when mortgage rates were low and falling, inventory was also falling each year., When money is cheap, we buy and hold real estate, so inventory falls. 

In 2018 though, mortgage rates and inventory rose all year. When rates rise and stay high, like in 2018 or the last three years, inventory grows. See the last three years of cycles at the right end of the chart.

And since there’s no sign of mortgage rates falling substantially, we expect inventory to keep climbing throughout 2025. Because of this trend, it may be that later this year we finally reach those old-normal levels of homes on the market, nationally. We only have 18% more growth to reach 2018 levels. In fact, there are many markets, mostly in the South that already have more inventory than 2019 or 2018. The Northern markets have still very restricted levels of homes on the market - but those are growing a bit finally too.

New Listings

The holidays are a really slow time for new listings of course. We’ll see a little bounce in next week’s new listings data. So let’s take the opportunity to look at a slightly different view of seller volume. I haven’t showed this view in a while. We counted fewer than 20,000 newly listed single family homes this week. The New Year’s holiday on Wednesday really slows everything. 

Remember we can track new listings in two groups: those that are listed and are now active inventory, awaiting offers. There is also the group we call the “immediate sales”. These are new listings that take offers within a couple days of listing and go into contract essentially immediately. THey’re not in active inventory, they’re already in the sale process. We started tracking immediate sales during the pandemic, since the market at that time was dominated by multiple offers and bidding wars. Buyer competition led to all kinds of craziness. That competition is almost completely gone now and the immediate sales are finally almost all gone too. We counted only 2700 immediate sales this week. This includes all the Christmas and new years overlap time, so it makes sense. But in this chart you can see how the immediate sales have been shrinking all year as demand cooled. 

In this chart each bar is a week. The taller the bar, the more sellers - new listings - in that week. The light portion of each bar are the immediate sales. You can see how the total new listings in 2024 were generally greater than 2023, there were more sellers each week. The bars at the right side of the chart are growing taller again. I expect another year of growth in seller volume for 2025. We won’t get back to the previous levels where we’d have 100,000 new listings in a given week like you can see in 2021 and 2022 in this chart. But we’ll continue to get more.

About 13% of the new listings are sold immediately now. That’s down from 35% during the pandemic. One in every three homes was basically sold as soon as it hit the market. That was craziness. Every market has immediate sales though. You probably recognize that rare house in the right neighborhood that savvy buyers wait to pounce on. Those always exist. It’s just that we’re back to a much healthier number of those now. About one-in-ten homes are super hot listings rather than one-in-three.

Pending Home Sales

That’s the supply side. Let’s look at the demand slide. This is where we’re watching to see if the trend is changing. 

There are 260,000 single family homes in contract right now. That’s roughly 5% more than a year ago. Any sales growth over 2024 is very welcome, but of course the total count of pending home sales is still 35% fewer than when we started 2022 at the end of the pandemic.

So a little growth seems to be in the works for this year. And as I mentioned, the holiday weeks are very hard to measure precisely; there’s lots of noise in the data. But if we look at just the newly pending sales for December, this year December shows no sales growth over a year ago. 

What we’re showing here in this chart are the total homes in contract. This number is at its low point for the year this week or next - see the very left side of the chart. Home sales start climbing in the next couple weeks. And at the far left side of the chart you can see that January is starting with about 5% more homes in contract than a year prior. But as I mentioned the weekly sales numbers have been flat for a few weeks. So those 5% gains are in danger of falling to 0% gains. There are two factors here. The holidays Christmas and New Years were on Wednesday which kinda messes up both weeks completely. But also mortgage rates spiked over 7%. So if you’re a potential buyer right now, it’s very easy to delay a purchase until later and see if rates fall again.
 
It looks to me like home sales momentum faded in December. I don’t have a way to tease out how much of the recent weakness in sales momentum is due to rates or due to holiday placement. But starting next week, each week will have clearer and clearer signal about how sensitive would-be home buyers are to the cost of money right now. 

At HousingWire we’ve forecasted 5% home sales growth in 2025. 4 million home sales in 2024 grows to 4.2 million in 2025. The recent data is worse than that forecast. Now it's a holiday, it’s early, it’s a short period. But it is something to watch in January in the face of relentlessly high mortgage rates. 

Home Prices

On to home prices. Home prices stayed remarkably resilient nationally in 2024 in a year where unsold supply of single family homes grew by 150,000. Home prices finished the year up about 4% over the end of 2023. 

The median price of the homes going into contract now is just under $377,000. See at the far left side of the chart the 2025 line is starting the year above previous years. That’s only 2.3% above the same week a year ago. This is the national view of course. Some markets in the northeast home prices increased by like 10% in 2024.  I had a friend mention that their suburban Chicago investment property had barely increased in value in a decade and suddenly last year inventory was so tight that home prices drove its valuation higher pretty significantly. The takeaway here is that if you use Austin Texas or Sarasota as your reference for home prices, you’ll probably miss the national trends. 

We expect the general trends from 2024 to continue in 2025, but less pronounced. Home prices will probably inch higher nationally, but move less than 2024. 

In this view we’re tracking the price of the newly pending home sales each week. We’ve used a 4 week average to smooth out some of the noise. In the next couple weeks we’re going to be watching how steeply this line climbs. After the new year, the best inventory starts getting listed, and the real estate seasonality resets. Prices peak in June. 

7% mortgage rates impact the prices paid, and you can really see the impact in June and October 2022 when rates spiked for the first time. So we’re always watching for home price impact of stubbornly high mortgage rates.

Days on Market

Let’s finish today looking at the time on market for the homes around the country now. Market time is a gauge of demand and you can see it reflected in the immediate sales metric I mentioned earlier. 

Homes are staying on the market nearly 80 days now, 78.7 days. That’s almost 20% longer than a year ago. During the pandemic it was down closer to 20 days at the peak of the craziness. This average takes a while to adjust because in slow times, some homes sit around for many months. 

Later in March when we have the most fresh inventory, most new listings each week and the most demand, that’s when days on market starts declining for the season. Home buyer demand peaks at the end of June and so the market time cycle starts climbing again in the later summer. 

One last note on Days on Market: In the Altos data we track total days on market. If a home has no offers, and gets pulled over the holidays and then relisted in the spring, we’ll count the total period. Sometimes sellers test the market and withdraw a listing that gets no offers. There aren’t a crazy number of withdrawals now, but that level is slightly elevated, so we’ll see some relistings this spring and that will drive the Days on Market number higher. 

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