Will We See Home Price Declines in 2025?

Recently we’ve shared that inventory of unsold homes is growing, and that in recent weeks, home sales have faltered in the face of 7% mortgage rates. We’re going to focus today’s video on the home price trends that are emerging for the 2025 housing market. We’re noticing some signals in the data that home prices, nationally, could turn negative this spring, showing year-over-year home price declines for the first time since early 2023. 

There are already plenty of markets across the country where inventory of unsold homes has built up over the last few years, and home prices have ticked down - places like Austin, Texas and Tampa, Florida. But nationally, home prices are still higher than a year prior. Some places in the north like New York state had pretty significant home price gains in 2024 since inventory is still very tight there. 

Now when we look at the active market data each week that we track at Altos, there are some signals this spring that more markets are softening and fewer that are pushing higher. Therefore prices averaged across the country could be turning negative compared to a year prior. 

Every week Altos Research tracks every home for sale in the country. We analyze all the pricing, supply and demand, and all the changes in that data and we make it available to you before you see it in the traditional channels. If you aren’t using Altos market reports with your clients, your buyers and sellers, now might be the time to step up. Go to altosresearch.com and book a free consult with our team. Because everyone is worried about what’s happening right now. They need you to help them see clearly. The data we cover here in these national videos is available for every zip code in the US. Join us to dive in.

I’m Mike Simonsen, I’m the founder of Altos Research. Let’s look at the data for the week of January 27, 2025. Please refer to the video below for all the charts I mention in this transcript!

Home Prices

We’re starting today with a look at home prices. The median price of all homes in the US this week is $421,000. If you want to buy a home, this is what’s available. What’s notable is that this home price metric is now 0.7% below last year at this time. Of all the homes on the market, they are now fractionally cheaper than a year ago. It’s important to note how unusual this is over the long term. 

This is one signal of nationally home prices declining from last year. This market is at a standstill as long as mortgage rates are over 7%. We see it in demand for homes and supply building and we see the impact of higher mortgage rates on home prices too. 

In this chart we have the median ask price for all the homes in the US. Each line is a year. By the end of January each year you can already see the trajectory that home prices will take for the full year. In 2022, the gray line here, it was the end of the pandemic boom and buyers were rushing to get a home before mortgage rates climbed. So there was a steep price appreciation in the first half of the year. Home prices climbed quickly each week and at the time were 10-15% more expensive than the year prior. 

Then 2023 - the lavender line here - the spring slope was much less steep. 2024 started a bit higher still but by June prices peaked for the year still below the June 2022 peak. Now the 2025 line is emerging at the left end of the chart. The price appreciation curve is flatter still this year. Each week even though the best new inventory hits the market, these are being priced fractionally cheaper than last year. This data is telling us that home sellers and listing agents know where demand is for homes, they understand the affordability crunch that buyers face and therefore they’re pricing the listings a little lower than last year at this time.  So that’s the active market of homes for sale. 

Meanwhile the price of the new contracts pending this week came in at $384,700, which was a little jump from last week. The median price paid for newly pending home sales has been averaging just 2% more than a year ago. So this measure is still showing barely positive home price gains, while the active listings are negative. Keep in mind that not all the home price measures are negative, some are still showing positive home price changes over last year. There is nothing though in any of the home price data this January showing any price appreciation momentum gathering. The momentum is negative. We’ll watch these data points over the next few weeks to see if more turn negative too. The home price risk is to the downside right now. 

Here’s one bright spot: 2025 is the third year of flattish home price changes. Over the last few years and hopefully over the next few years, incomes are climbing faster than home prices. When incomes climb faster than home prices, we improve affordability. This market is slowly  improving affordability in this country. At some point in the future, the cost of money drops and that will be a dramatic benefit for affordability.

Price Reductions

We use the percent of homes on the market with price reductions as a leading indicator for future sales prices. And the signals here are not particularly strong either. Right now, 33% of the active listings have taken a price cut from the original list price. Last year at this time is was 31%. More sellers now are facing an absence of buyer demand so they feel necessary to reduce their asking price. 

In 2023 this number was 33.9%. The weakest pricing moment of the last three years was the fourth quarter of 2022. By January 2023, price cuts were still elevated. But at that moment, we were surprised at how quickly the market was recovering. You could see that recovery in the lavender line here. It was declining more steeply each week. At the time 80 or 90 basis points per week compared to 50 basis points now. 

In this chart each line is a year. We’re at the left end of the chart and you can see how the navy blue 2025 line is flattening out. At the current pace, it looks like by the end of February we’ll have the most price reductions of any February in many years. See how the navy line is about to cross over the purple one here? 2023 pricing was recovering with sharply fewer price cuts each week. This year is much weaker for home prices. 

These are homes that are on the market now, with no offers. They take a price cut and hopefully get an offer in February. That deal closes in March. So by April you should be hearing the headlines reflect the weakness we can see in the active market data right now. 

And when we look at the supply data, supply of active inventory is continuing to grow. That says that these pricing trends are poised to continue. 

New Listings

On the supply side - there were 51,000 new listings unsold this week. That’s 13% more than last year at this time. Including the immediate sales there were 4% more sellers. This continues our expected pattern for the year, which is more sellers each week than a year ago. 

That growing supply pattern is healthy if we also have more buyers, but right now with the cost of money still so high and not showing any signs of decline, the buyers are waiting too. So inventory is building across the country. 

In this chart, each line is a year with the weekly count of unsold new listings. At the left end of the chart you can see the sellers in 2025 looking much more like the old days. The gray lines are previous years. The bright blue is last year’s curve. In 2024 there were more sellers each week than 2023. 2025 continues that trend with more than 2024. We’ve now been out of the pandemic crazy market longer than we were in it and we are finally returning to normal levels of sellers and of unsold inventory.

Inventory is building this year and I think it is important to point out that more sellers are generally good for the housing market. We want to see this curve grow from 50,000 to 60, 70 and 80,000 each week by the peak in June. I don’t expect we’ll see 100,000 new listings in a given week this year, like we did last decade, but maybe we’ll hit 80k. 

More sellers means more selection for buyers. It means less upward pressure on home prices, which we’re seeing now. More sellers implies improvement on affordability - especially over time. The vocabulary can be tricky here. Price “weakness” is actually probably a good trend for Americans facing a housing affordability crisis. 

Inventory

And when we look at the total inventory of unsold homes on the market, that count continues to climb for the third week into January. There are now 637,000 single family homes unsold on the market. That’s up 0.7% from last week and is 26.5% more than a year ago. Most years in January we see some fluctuation up and down until inventory starts building for the spring season more consistently in February. But the circumstances this year seem like they’re set up that we may already be past the low point of inventory for the year already. A couple weeks ago we counted 624,000 homes on the market. We’re at 637,000 now.

At the left end of the chart here you can see the 2025 line taking shape. Each line here is a year, and most years there are some ups and downs with the total number of homes unsold on the market in January and February. Most years experience a few down weeks with less inventory before the spring season really kicks in in February. So far this year we’ve only had up weeks. That is, inventory is building earlier in the season. This is a function of slightly more sellers and still fewer buyers. Home buyers are waiting. 

Remember during the pandemic boom, there were many more buyers than sellers so inventory kept declining all the way until March or April. We were buying everything in sight. This year’s inventory trends are showing renewed weakness in demand after a slightly better Q4. 

Pending Home Sales

It’s funny too because just now we’re seeing the headlines for December from the traditional housing data sources. Those are now telling you that Q4 had some improvement in sales volume.  But this housing market never relents and in the active data, those December sales gains are gone. There were 52,000 new contracts pending this week. This was another week when sales came in fewer than last year at this time. Last year saw 56,000 sales started during the same week of January. That’s 7% fewer sales now than last year. It’s pretty clear that in January, home sales are underperforming 2024.

There are 266,000 single family homes in the contract pending stage before the sale closes. That’s 3.5% fewer than last year at this time. The gap between this year and last year is growing. Last week was 2% fewer total pendings, now it’s 3.5% fewer.  By the way, we’re looking here at single family homes transactions. The data for condos is even weaker. 

In this chart each bar is a week with the total count of homes in the contract pending stage. The taller the bar, the more sales are underway. This week is the far right end of the chart. The bright blue section are the new contracts pending for the given week. The bigger the bright blue part the more deals are getting started in a given week. That’s our immediate gage of demand. That number was 7% fewer than last year and has been averaging 9% fewer sales over the last few weeks. 

in the fourth quarter last year sales were coming in above the year prior. Those are the headlines you’re hearing now and that was data we shared way back then. Mortgage rates rose over 7% in December and so we are now seeing the slowdown in buyer demand. We see it in prices and we see it in offers being made each week. 

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