More Home Sellers, Fewer Sales

There were 45,000 new listings for single family homes across the country this week, which is a big jump. It’s 12% more sellers than a year ago. This is the trend I’ve been talking about as a big theme for 2025. It seems like more sellers are coming out every week.

Mortgage rates pushed close to 7.25% this week. It’s only two weeks into January and mortgage rates have hit the high end of the range we forecasted for the entire year. Unlike a lot of forecasters in the mortgage world a few months ago, our projection included the notion that with strong jobs data and some inflation fears, the bond market could indeed push mortgage rates over 7%. That’s exactly what happened. And it happened quickly. 

I remain optimistic that later in the year the economic news relaxes a bit and rates fall closer to 6% or even under 6%. Those scenarios are possible, and it’s going to be fascinating to see how the bond markets react to new administration policies. Right now, the sentiment is very bearish. Bond markets have driven mortgage rates back to the highs, and home sales are suffering. Sellers are up, but sales are down.

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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 13, 2025. Please refer to the video below for all the charts I mention in this transcript!

Inventory

Total inventory dipped this week to 624,000 single family homes on the market. That surprised me a little bit. Total inventory dipped more because of withdrawals than because of purchase demand. It’s early in the year and the new year’s market is still emerging, but I expect next week will see an inventory increase. 

There are now 24% more homes on the market than a year ago. We’re expecting inventory to grow for 2025 and end the year with about 15% more homes on the market. In this chart I’ve illustrated 10 years of inventory changes and I’ve highlighted January 2018. You can see that the market still has a fair bit of growth before it reaches the old normal levels of inventory. There are 19% fewer homes on the market now than in January 2018. By that measure 2025 could be the last year of the era of really restricted inventory. 

If mortgage rates stay in the 7s for long, we’d expect inventory to grow faster and we’ll have to revise our 2025 inventory forecast higher. This week inventory dipped though, so we’ll see what happens next. 

New Listings

So that’s the total inventory of unsold homes which are on the market and you can buy. The supply story in real estate also must take into account the new sellers each week. This week, there were 45,000 new listings for single family homes across the country, which is a big jump from the new year’s week. There were 12% more sellers this week than the same week in early January 2024. This is the trend I’ve been talking about as a big theme for 2025. It seems like more sellers are coming out every week. 10-12% more sellers each week gets us back to normal pretty quickly. More sellers than that might trigger price pressure. Home prices could fall so that’s definitely something we watch for. 

We mostly focus on single family homes in these videos, but we should note that there were more condo new listings this week than we’ve seen in the same week of January in 10 years. Condo inventory is growing too.

In this chart the dark red line at the left end is this year. See the trajectory, it’s only two weeks into the year, but it looks much more like the old days than the red line from last year or 2023.  The gray lines are the weekly new listings counts for each of the last 10 years. The bright red line is the 2024 line. In the post-pandemic era, the defining characteristic is how few new listings were hitting the market each week. So the question is: is that era over? It’s only a couple weeks into January, so the dark line could turn horizontal, but the early indications are that we’ll continue to have 10, 12 or maybe even 15% more sellers each week in 2025. That’s a significant change. 

I do not expect a rocket here, I don’t see a flood of new sellers. I don’t know why a big flood would happen. But we do see growth. There were 45,000 new listings this week, if there are more than 50,000 new listings next week, that would be notable.

Pending Home Sales

Let’s look at the demand side of the equation. There were just under 41,000 newly pending contracts for single family homes this week. That was 3% fewer than the same week a year ago. So there were 12% more new listings and 3% fewer sales started. This is a very notable change from late last year. In this chart, the dark line for 2025 is at the very left end of the chart. It’s the same or just a bit lower than the sales rates of 2022 and 2023. This is tracking the new contracts started per week. At the right end of the chart see the bright red line from 2024. See how it was above the year prior for most of the fourth quarter. As of now that trend hasn’t continued. 

Now there are just 252,000 single family total homes in the contract pending stage. That’s basically unchanged from a year ago. It’s less than 1% change from 2024 sales levels. We’ve been at 5-6-7% sales gains over a year prior. But after a few weeks like this week, those gains have pretty much evaporated. The home sales gains that we saw in the fourth quarter are now gone. 

I’ve talked about how at HousingWire we expect about 5% home sales gains for the year. That means 4.2 million home sales in 2025 up from 4 million. That’s the momentum we had in the fourth quarter, but January is starting with no gains. So that forecast is something we’re very much keeping our eyes on. Mortgage rates continue to climb and we can definitely see the impact on transactions.

On an absolute level, home sales should pick up next week as we inch closer to the spring. 41,000 single family homes started contract this week. Next week it should be in the upper 40s. But that’ll still be lower than a year ago. The 10 year treasury yield is up again today so there doesn’t appear to be any mortgage relief in the short term. 

Home Prices

The median price of the homes that started contract for sale this week is just under $375,000. This is the price point that Americans are buying. It was a smidge lower than a week ago. And barely above the prices paid a year ago at this time. Home prices by this measure, the weekly new pendings price, have been about 4-5% higher than a year ago. Now they’re looking like a 2% yearly increase. 

So the demand impact we can see with transaction volume looks like it’s manifesting in fewer sales and also in weaker sales prices. With more homes on the market, with fewer offers, home prices are not appreciating.

The median price of all the homes in contract is $395,000 which is just under 4% more than a year ago. Those 252,000 home sales will close mostly in January and February. There’s still a little gain in that price measure because many of the sales in process started their contracts back in the fourth quarter.

The takeaway in home prices is that as we roll into the new year, there is almost no momentum for home price gains right now. And the headlines with the traditional measures, like the Case Shiller index will be catching up to that change soon. Will be interesting to see if elevated mortgage rates turn home prices negative in the coming months. 

Price Reductions

As we start the new buying season, fresh inventory gets listed and a lot of the stale stuff is withdrawn over the holidays. As a result the percentage of active listings with price reductions ticks down now and for the next several weeks. So even though we see weakness in sales prices, there are relatively fewer sellers taking a price cut each week. This week 33.9% of homes on the market have had price reductions from their original list price. 

This chart is very useful right now and for the next couple months. At the left end of the chart we have three lines to pay attention to. In 2023, that’s the light red line here at the left end of the chart, the market had been ultra slow in the fourth quarter of 2022, so price cuts were elevated. But by January 2023, they were falling quickly each week. That showed renewed buyer interest and boded bullish for home prices for the full year. And in fact, 2023 proved to be a recovery year in home prices. We could see it in January in this price cuts line. See how the light red line keeps improving. Contrast that to last year where the market was surprised by a mortgage rate surge in the first quarter. The bright red line registered that and turned higher, with more home sellers cutting their prices. 

Now we’re in between these two. In the next few weeks watch the slope of the change in addition to the absolute level. There will be more fresh inventory next week so the percent with price reductions will be fewer. But if a bunch of the existing cohort isn’t getting offers those will cut their prices and the slope of the dark line will be less steep. That’s what I’m expecting. And we’ll see in the next few weeks if it comes to pass. 

There is very little in the data right now that sees home sales or home prices heading higher. The signals are pretty bearish right now. Hang in there. 

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