The important thing to know when tracking housing inventory in 2024 through next year is that the country is bifurcated. Inventory has built dramatically in the South, while at the same time, the number of unsold homes available in the Midwest and Northeast is still very tight. So if you live in Tampa, for example, it can be tempting to look around and see doom in the housing market. If you live in Chicago, on the other hand, you might look around and say that home buyers still have it tough.
What’s going on? There is one big macroeconomic trend dividing the country which has effectively made it two separate markets, and that’s migration. Not immigration, migration - Americans moving across the country. For years, Americans have been moving to the sunbelt. From Chicago to Arizona and Texas, from New York to Florida. In the last two years, especially in 2024, we’ve stopped moving. And that’s what we’ll be looking at today.
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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 December 2, 2024. Please refer to the video below for all the charts I mention in this transcript!
There were 707,000 single family homes on the market heading into the Thanksgiving weekend. That is roughly 27% more unsold homes on the market than last year at this time. This is right where we’ve been expecting inventory to end the year. 27% is a lot of inventory growth in a single year. And there are now only 18% fewer homes unsold available on the market than in November of 2019. Just 18% fewer. We’re almost back to the pre-pandemic levels of inventory. We expect unsold inventory to keep growing in 2025 though not by 27% again. Depending on the macro economy and the whims of the mortgage markets, we could see inventory return close to those old normal levels by the end of next year.
This is the inventory chart. In this view, each line is a year. The 2024 line is in the dark red right in the middle. The gray lines at the top are the years before the pandemic. You can see how 2025 with a little more inventory build will get closer to the old normal, finally. You can also see how the natural seasonal decline of homes on the market is underway now. Next week inventory will dip under 700,000. The Thanksgiving holiday was late this year, so we see more of that impact in December inventory levels.
As I mentioned the country is bifurcated into two markets. The North and the South. If you’re in Dallas, you’ll notice that there are more homes for sale now than any time in the last decade. Inventory is way up. If you’re in Chicago, you’ll notice that there are 60% fewer homes for sale than there used to be.
Why is that? Well we’ve been moving from Chicago to Dallas for a long time and we’re not moving right now. It’s really expensive to move right now. Houses are expensive. Mortgages are expensive. Even though unemployment is low, jobs are scarce. Even if you’re retiring, rising insurance costs and climate disasters are making it very expensive and risky to move to some of these Southern markets. We stopped moving so we’re not selling in Chicago and we’re not buying in Dallas.
When we’re analyzing the supply of homes for sale in 2025, keep your eyes on this bifurcation. I expect that we see some loosening of this migration freeze next year. Not a lot but a little. That’ll help inventory in the North to grow a bit and tighten up inventory in the South.
We counted 52,000 new listings for single family homes this week with another 12,000 condos newly listed for sale. That’s 3% fewer than a week ago. Looking at the data here you can see that the late Thanksgiving holiday will show up in the December numbers one week later than most years. The red line here is this year’s curve, compare it to the gray lines of years past. At the right end of the chart you can see the annual Thanksgiving dip, which we’ll see in next Monday’s report. Then just a couple more weeks before Christmas week and the New Year resets for the spring.
After the new year, during 2025, we’re watching for hopefully about 5-10% more sellers each week. I don’t anticipate it’ll be much more than that unless some big macro dynamics change too. 5-10% more sellers each week.
When we talk about the two markets, I anticipate we’ll see some migration resuming in 2025. It’s a good time to sell your house in New York so I anticipate more new listings in the northern states than we’ve seen in the past couple years. So this bifurcated market eases a little. Right now there are 1100 new listings each week in the Chicago metro, that’s down from 1800 per week in the pre-pandemic normal times. I expect that to grow in 2025.
Nationally, we want to see new listings climb. If we see new listings climbing more than 10% each week in January and February, that’d be a signal of potential supply and demand imbalance that we have not yet seen in the post-pandemic era. If a supply imbalance happens, we will keep our eyes open for home price correction. It’s not in the data yet, but it’s always worth watching for.
There were 56,000 single family home sales started in the week running up to Thanksgiving. It's interesting watching some sales get crammed in before the holiday. That was actually an increase of almost 1% from the week prior. There were another 12,000 condo sales started.
I’m showing here a 4 week average for home sales, which is 54,000. It doesn’t include the big Thanksgiving dip, which will drop way down into the 30s when we report next Monday. Using the monthly average here to smooth out some of the noise.
The headlines citing home sales growth over last year have finally caught up to the data we’ve been reporting for a while. NAR reported 6.6% growth in their October pending home sales data which mirrors what we’ve been reporting here for a few months. Home sales in the 4th quarter of the last two years have been so abysmal that I expect the headlines will report sales growth for at least a couple more months. We can see each week there are more new contracts pending that we counted in either of the past two years. As I say all the time, it’s not a lot of home sales, but at least it’s better than last year.
The real question is what happens next. Since mortgage rates are up near 7%, and home prices nationally have not fallen, the average payment that home buyers are making now is back at the record high levels for December. I’d expect weakness in Q1 if rates haven’t eased down at all by then. At HousingWire we expect about 5% more home sales in 2025 than in 2024. But until we see some improvement on affordability, that forecast is pretty tentative.
The median price of all the homes in the US is $428,800. That’s up just 1% from last year. This is the median price for those 707,000 single family homes that are in active inventory right now.
I haven’t shown this view of home prices in a while. This is the long-term view of home prices over time. The dark line is the asking price for all the homes on the market around the country. The red line is the price of the cohort of homes listed for sale in a given week. I like this view because it clearly shows the seasonal peaks and troughs. And it shows us leading indicators for future sales prices.
The price of the new listings is commonly below the whole market because that’s where the demand is. The median price of the new listings is $389,900 this week. That is also exactly the median price of the homes going into contract. More expensive homes sit on the market longer and the dark line median is higher.
After the new year we can gauge the buyer demand strength by how quickly that red line jumps. Look at 2022 right in the middle of the chart. In the first quarter of that year everyone was buying and bidding because mortgage rates were rising. That was the last of the pandemic boom market. When you’re a seller in that time, you see the demand and you list your house at a little premium. When sellers list at a premium the red line rises quickly there.
Home prices as measured by the price of the new listings are up 4.7% over last year at this time. That’s right in the range with most of the home price metrics. We expect home prices to be softer in 2025 than this year and one of the early places to test that hypothesis will be to watch the trajectory of the price of the new listings after the new year.
The takeaway for home prices is that: prices will finish 2024 up about 5% over 2023. That was a surprise to me given how weak home buyer demand was all year. But nonetheless that’s where we are. We’re expecting home prices to rise only 3.5% in 2025 and we’ll watch these leading indicators during the year to confirm that.
Price cuts have yet to notably decline for the winter. 38.9% of the homes on the market have taken a price cut from the original list price. That’s 50 basis point fewer than last week as there’s more homes absorbed each week in the holiday season. We see some sales and some withdrawals. For the existing stock, some slightly more price cuts are happening now. For the homes sitting on the market if you aren’t withdrawing over the holidays, then some are taking price cuts. It’s a subtle measurement, but normally you might expect 80-100 basis points fewer in this metric each week this late in the year, but we only ticked down by 50 basis points recently.
This is one of the leading indicators that makes it hard to imagine home prices climbing 5% or more again in 2025. Right now, at these levels of affordability, there are still a lot of sellers who aren’t finding the offers they were hoping for.
The takeaway on price reductions is that you can see some price sensitivity along with mortgage rates around 7% and after the new year we’ll be watching for new signals about the rest of 2025.
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