There are two trends that bubbled to the surface in this week’s housing market data. We talked last week about how the price reductions leading indicator has been growing more bearish for home prices. That continued this week, as the percent of homes on the market with price reductions ticked up again. That’s unusual for how early in the season it is.
The other trend is more subtle, but worth exploring: as potential home sellers see the weak demand in the market - offers not being made, price reductions, etc. - those sellers are choosing to not test the market. So while inventory isn’t shrinking yet, the trend we’re seeing is that of fewer home sellers in relative terms. And if potential home sellers don’t list their homes, that will keep a lid on supply growth. We’re going to spend time on this today because it’s a potential reversal from last year’s trend, and the data is coming in counter to my expectations for 2025.
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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 February 10, 2025. Please refer to the video below for all the charts I mention in this transcript!
Over the last year we’ve been in an environment with 5-10% more sellers each week than a year prior. The new listings stat that we discuss here has been growing. Not a ton, but slightly more sellers. I took this as a sign that the market was slowly normalizing and that inventory would continue to build throughout 2025. But in recent weeks, we’re only averaging about 1-2% more sellers and this week actually had fewer sellers in total than the year prior. The trend has been 10% more sellers, now the trend is almost no growth.
The post-pandemic era has been characterized by very few home sellers. As we’re three years post-pandemic now, I’ve been seeing these signs that the market was normalizing. Every year we have fewer people locked into ultra cheap mortgages. So we’ve had more sellers slowly coming back to this market. In the fourth quarter last year we also finally saw home sales growing. That trend of more sellers and more sales each week seemed poised to continue into this year.
But there are some signs now that the housing market is stagnating again. Specifically I’m talking about the weekly new listings volume now compared to a year ago. We know that home sales volumes have fallen in January. And now that momentum with sellers’ new listings each week seems to be evaporating too. Fewer sellers each week implies we’ll have a cap on inventory growth this year, even though demand is weak. So fewer sellers means less inventory and fewer sales.
I thought I’d start today with this different chart that we usually share. In this chart I’m showing the percent change in new listings volume from the year prior. Above the line means the market is growing, below the line, it’s shrinking. The most obvious point in this chart is July 2022. That’s when sellers just stopped abruptly. That moment was a powerful signal that inventory had a cap for the year in 2023. There were just dramatically fewer sellers each week.
By November 2023, sellers reemerged a little bit and the line went positive. For most of 2024 there were slightly more sellers than the year prior. And we talked about that growth all year long. But look at the trend now. Toward the right end of the chart, the weekly growth in sellers is shrinking. See how the trend in the chart is slowly lower. In fact the line turns negative more frequently now. This is not an abrupt change like July of 2022, but this implies to me that potential home sellers are frustrated and that means that inventory doesn’t have a ton of momentum for growth coming up. There are just barely more sellers now than last year. Some weeks we have fewer sellers than last year. Any Inventory growth now is because demand is really weak. It’s not coming from the supply side.
The takeaway here is that if you are assuming that inventory will surge in 2025, that trend sure does not appear to be under way. We still expect inventory to grow over 2024, but watch this new listings trend to see what happens next.
That was the percentage change, this is the count of unsold new listings each week. There were 54,000 new listings unsold in the first week of February plus another 10,000 new listings immediate sales that are already in contract.
As I mentioned there were just slightly more new listings unsold than a year ago. And there are 30% fewer immediate sales now than a year ago. Of the 64,000 total sellers this week, almost 10,000 are already in contract leaving 54,000 to add to active inventory. While there were 3.8% more unsold new listings than a year ago, the total count of sellers is actually less than a year ago. 64,000 now vs 66,000 then.
In this chart, each line is a year. The 2025 line is emerging at the left end of the chart. You can see that there are still a tiny bit more unsold new listings than last year. But there’s just not a lot of momentum for significant inventory growth. The purple line is aiming at the low end of the chart, just above last year’s blue line.
Many of those gray lines from years past show that it wouldn’t be uncommon to have 70 or 75,000 new listings unsold in early February. As we started the year, I was more optimistic that we’d see this year’s seller curve approach those previous levels. But now there are just 54,000.
When we track the supply side of the equation, we want to watch both the weekly level of new listings and the total inventory of unsold homes. Even though new listings volume is climbing for the spring, there were 10% more sellers this week than last, it’s starting to look like inventory growth will be capped.
And as a result, the available inventory of unsold single family homes on the market fell by 40 basis points this week. There are now 632,000 single family homes on the market around the country. That’s down from 635,000 a week ago.
Inventory fell for the second week in a row. It’s not unusual for this time of year to have a down move in the total inventory count. Though it is counter to January’s trend a bit. Inventory rose through January, with weak demand, but in February, inventory has shrunk a tiny bit, which I think is related to that trend of discouraged potential sellers that we just covered.
The lowest week of the year for inventory was the second week of January. Our forecast model expects inventory to tick up in the next couple weeks and then grow consistently starting in March. Notably there are slightly fewer homes on the market now than the model expected a few weeks ago.
In this chart we’re looking at the total inventory of unsold single family homes on the market over the last decade. There are 27.8% more homes on the market than last year at this time. That percentage gap hasn’t grown in several months.
When you look longer back in history, the question is, when does inventory reach the old normal levels before the pandemic? We still have 17% fewer homes on the market now than in February 2018. It’s going to be really fascinating to see if we cross over that threshold this year. I believe it will be healthy for the housing market to get the old normal levels of inventory. But I’m growing less optimistic that we’ll get there in 2025.
Maybe one reason potential home sellers are getting cold feet is because they can sense pricing weakness. We pointed out this trend last week. The percent of homes on the market with price reductions from the original list price is now at the highest level for February in over a decade. Price Reductions ticked up by another 10 basis points this week to 33.2% of the homes on the market.
In this chart the purple line is for 2025. The green line was back in 2023. Notice at the left end of the chart the 2025 line has crossed higher than 2023. At the time in 2023, price cuts were declining each week. This was a signal of improving demand and support for home prices. In early 2023 we talked about this and it was a very contrarian observation at the time. Everyone thought home prices were tanking. We could see in this Price Reductions indicator that each week sales were happening so fewer price cuts were needed.
This year the opposite is underway. Price cuts are ticking up each week. That’s very unusual for this early in the season for it to be happening. Last year just over 30% of the listings had price cuts and that was declining by 40 basis points per week. This year the leading indicator for future home sales prices is weaker than last year.
This does not bode well for home prices in 2025. If you’re a home seller this spring, this says to me that you want to be ahead of this trend. You want to price your house properly from the start. Don’t wait until pricing conditions worsen from here. Local markets vary of course, you can look up the price reductions in any zip code in the country with the Altos data.
The median price for all the single family homes available in the US this week is $425,000. That’s essentially unchanged from a week ago and is unchanged from last year at this time.
The price of the homes going into contract - these are the homes whose sales will close in March, was $389,000. That was a little step down from a week prior and is only 2.4% more than last year at this time. That’s the data we’re looking at here. This year’s purple line at the left end of the chart. Home prices are nominally just above a year ago, but in real terms, home prices are below last year.
Some things to keep in mind about the home price trends:
- Even though home buyer demand is weak, and we have data that shows impact on prices, there’s no sign of a big decline, like 5% or more, in the national data. There are plenty of markets where inventory is sufficiently tight that home prices are pushing up still. There are some markets where home prices are sliding lower.
- Home prices staying flat or even slightly lower for an extended period is unusual in the history of the housing market, but it’s probably what we’re in for. And it slowly helps the affordability crisis. Incomes have been rising faster than home prices and that’s a good thing.
On to sales volumes. There were just over 57,000 new contracts started for single family homes this week across the country. That up a couple percent from last week, but came in 5% fewer than the same week a year ago.
The slow purchase market continues into February. In the 4th quarter we were optimistic that home sales growth would continue into Q1, but that’s not happening as of now.
In this chart we’re plotting home sales with the newly pending contracts each week for this year and last. In the fourth quarter last fall, home sales were about 5-10% more than a year prior. Now those sales gains are essentially gone. The 2025 line here is coming in just below the 2024 line. This is where we’re counting the new contracts pending each week. Homes take about 40 days to close the sale, so most of these sales will close in March. It sure seems like the headlines for home sales are going to be bearish for the next few months.
This is how we wrap it up today: We can see fewer sales happening. We can see the weakness in demand impacting prices. And we can see that potential sellers are not dumb. They’re waiting until conditions improve.
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