Weak Demand Is Forcing More Home Sellers to Reduce Their Asking Price

There are some really interesting price trends happening across the country right now. I mentioned last week how weakness in demand had cause some of the measures for home price changes to slide into negative territory compared to a year ago. This week, another signal of future sales prices slipped in a bit of a surprising way.

These are not catastrophic signs. It’s not like there’s panic out there. In fact, inventory of unsold homes on the market ticked down fractionally this week. It’s not uncommon for January to have a little up and down in the inventory numbers. If inventory were jumping each week, that would be notable. But it’s not. The supply numbers are growing just a little bit. 

But as inventory builds and there are fewer offers from home buyers, more sellers feel the need to reduce their asking price. Price reductions ticked up this week, which is unusual for the last week of January. 

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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 3, 2025. Please refer to the video below for all the charts I mention in this transcript!

Price Reductions

Let’s start the data today with the price reductions number. In recent weeks I’ve shared how the data shows weakness for home prices. Prices are not falling or crashing, but most of our home price metrics are barely positive from last year at this time. Essentially home price appreciation is flat vs last year at this time. 

We regard this metric, the percentage of homes on the market with price reductions from the original list price, as a leading indicator for future sales prices. Looking backward at the market we can see sales prices are not appreciating vs 2024 and looking forward we see weakness too in future transactions. 

Price reductions actually inched up this week by 10 basis points. 33.1% of the homes on the market have taken a price cut from the original list price. That’s up from 33% last week. It’s a pretty small move, but it’s in the wrong direction. When I say “wrong” I mean that almost always this early in the year price cuts are declining. Normally, fewer folks need to cut their price in the spring. At this time of year there’s new inventory and new buyers are shopping. But this year in recent weeks we can see that those buyers are waiting. Sellers who don’t get an offer may choose to cut their price. So normally there would be fewer price reductions at this time of year. But this week price reductions ticked up. 

And notably, this is the first instance of an uptick in price reductions in January in over 10 years. 

In the chart here, the purple line at the left end of the chart is 2025. See that line turned the corner this week. It’s up a fraction from last week, 10 basis points, and in fact there are now more homes on the market with price cuts than even in 2023. 

The green line is the curve from 2023. Now, 33.06% of the homes on the market have taken a price cut. In 2023, it was 33.01%. It’s just 5 basis points more, but that means there are now more homes with price cuts than at any time in at least the last decade - for this moment in the year. Last week I mentioned the possibility of this transition happening. It happened faster than I expected. 

In 2023, housing demand was actually rebounding after a very slow Q4 2022. That green line was dropping each week. Now the market is decelerating so more price cuts are kicking in. The purple line turned horizontal and even climbed just a tiny bit.

This is why the current data shows continued slow housing demand and continued weakness in home prices. There are few offers being made right now, so more sellers are finding the need to reduce their asking price. That trend is likely to continue until mortgage prices come back down. 

Home Prices

The median price for home sales contracts entered this week was at $389,700. That’s up a percent for the week and is 2.5% more expensive than home sales in the same week a year ago. 2.5% annual gains for the homes taking offers right now. In the scale of housing. 2.5% is basically zero. Just barely positive. While there are plenty of markets that have home price gains from a year ago, there are also a lot of markets where home prices are declining.

Last week I shared that the median price for all the homes on the market across the US had recently dipped below a year prior. The median ask price was lower now than last year. This week saw a little uptick in the active market so the median price for all the homes on the market is now $424,900 which is exactly unchanged from a year ago. 

There’s kind of an ironic scenario which might reverse the trend and push home prices higher in 2025. This is one where new administration policies actually really harm the economy. There’s a lot of chaos right now. Depending on the day and the latest headlines some of those actions threaten to tank financial markets. 

For example consider a scenario where the government follows through with these tax increase threats, and at the same time reduces government spending.  A shrinking US economy would likely push bond yields lower. Lower yields on the 10 year treasury leads to lower mortgage rates. This is the scenario that happened in 2019 in the last tariff trade war. The economy slowed so rates fell. By early 2020 mortgage rates were pretty low so by the time the pandemic hit, the housing market was already heating up. 

I don’t have any ability to predict which of the taxes get enacted or whether stay enacted. I don’t have a view on how dramatically the financial markets react. I have no idea. Over the weekend, the markets were reacting to news of massive new taxes. But maybe those threats are gone now? One side effect of chaos is bond yields fall. Wouldn’t that be an ironic headline? “As the economy tanks, home prices soar!”

Anyway, who knows if that scenario happens? It is merely a scenario which might change the current trend of home price weakness in 2025.

The price chart we’re showing here is the median price of the newly started home sales contracts from this week - new pendings. 2025 is the purple line at the left end of the chart. Home prices are just under $390,000 currently and just a little above last year. The blue line is the curve from last year. 

We continue to expect a little climb in this number over the next few months as the prime days of the home buying season are still to come. Even in a weak demand environment, home prices will lurch higher in the spring. Home sales tend to cluster around the big round numbers, and you can see the cap here at $400,000 last May. Because of this clustering effect, it’s hard to see the market busting past that plateau this year. 

Inventory

There are 635,000 single family homes unsold on the market now. That’s actually a tiny fraction fewer than a week ago. As I’ve mentioned, it’s not uncommon for inventory to bounce up and down a bit in January, bouncing along the bottom before inventory starts building in earnest for the spring. But as I’ve also mentioned, it seems like we’ve already passed the low point of inventory for the year. That’s very early in the year for supply to start growing. Our down moves are smaller, the up-ticks are bigger than they have been in a long time. 

We can see the same dynamic that’s driving the price reductions driving inventory. There are a few more sellers each week, but the demand is light, so inventory continues to build. There are 27.7% more homes on the market now than a year ago. 

This isn’t a new trend but it is maybe a little faster than we anticipated. We’ve forecasted 15% gains in inventory for the calendar year 2025 over 2024. The current forecast model is showing 17% gains by the end of the year. 

This chart covers the last decade of inventory. You can see each year’s curve with the most inventory available in the middle of the year. January and February are the low parts of the curve. At far right end of the chart is where we are now. Notice how three years of rising mortgage rates have led to three years of rising inventory. I’ve highlighted where we were last year. And where we were back in 2018. There are still 17% fewer homes on the market now than back then. but as the year progresses will get very close to those old normal levels.

New Listings

There were just under 49,000 new listings unsold for single family homes this week. That’s actually fewer than a week ago though it’s still 10% more than last year at this time. When we include the new listings already in contract to be sold, it totals almost 4% more sellers than a year ago. That’s a little disappointing, to be honest. I am hoping for 5-10% seller growth each week. I believe that would be healthy for transactions. 

In this chart the purple line at the far left is the 2025 year taking shape. Each week has more sellers and more homes unsold newly listed than a year ago. Last year’s line is in blue here. That growth is pretty consistent. 

It’s still not a lot of sellers. The gray lines are past years and while 2025 has more than 2024, it’s still fewer sellers than in years past. In the fifth week of the year in 2020 for example, just before the pandemic hit, we counted nearly 74,000 new listings. That 50% more sellers than we had this week. 

The takeaway for the new listings data is that while seller volume continues to inch higher, that’s a good thing and the market could use even more sellers. 

Pending Home Sales

Ultimately home sales are restricted in the same way that new listings are restricted. We’re moving less. We’re moving less across town and moving less across the country. I’ve been expecting this trend to ease a bit in 2025, with a slight resumption of people moving to the sunbelt. But the trend is barely budging so far. 

There were 56,000 newly pending home sales this week. That’s a nice nearly 8% increase fro the week prior. This is the time of year when you’d expect home sales to grow each week. So that’s good. In fact, home sales were actually a tiny fraction higher than last year at this time. There were 1% more sales than the same week a year ago. Sales have been averaging nearly 5% fewer than at the start of 2024. So I guess any positive reporting is good news? 

That’s what we’re looking at with this chart. The 2025 purple line has been trending lower than the 2024 blue line. This week bucked the trend with a little positive move to 56,000 new contracts started.

In total there are now 282,000 single family homes in contract. That’s three and ahalf percent fewer than a year ago. There are fewer sales pending now than last year at this time. These are sales that will mostly close in February, so by our count the February home sales headlines when they’re released in a few months, will be pretty bearish on sales. 

2024’s week period for sales was in the late summer. That’s right in the middle of this chart. That point was when mortgage rates jumped again and home buyers got really discouraged until September. Who knows what happens with the timing of mortgage rate moves during the year, but if we’re lucky, maybe by summer mortgage rates have eased, so 2025 shows a gain in home sales at that time. That’s just speculation but it’s something to watch for later in the year. 

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