
Every January, housing inventory typically experiences a dip before ramping up as spring approaches.
However, this year, February 3, 2025, brings some concerning insights from Mike Simonsen.
He notes that dwindling buyer interest is pushing national price trends into negative territory compared to last year—an unexpected indicator of weakening demand and falling prices.
Shifts in Price Adjustments
While these changes aren’t catastrophic, they do warrant attention.
This week saw a slight decrease in the number of unsold homes, which is typical for January as the market gears up for spring.
A significant spike in inventory would raise alarms, but fortunately, that isn’t the case right now.
As competition rises and buyer eagerness dwindles, sellers are feeling compelled to adjust their prices.
This past week, the number of price cuts increased unexpectedly—which is unusual for this time of year.
Simonsen has observed a worrying trend in the housing market.
Home prices aren’t crashing, but year-over-year price growth is essentially stagnating.
The proportion of homes with price reductions is a key signal for future sales price trends.
Historical data shows that this year’s price appreciation isn’t matching last year’s.
Recently, the percentage of homes with price cuts nudged up to 33.1%, slightly up from the previous week’s 33%.
While this uptick is minimal, it breaks from typical seasonal patterns when price reductions usually taper off.
As spring approaches, you’d expect fewer sellers to lower prices due to an increase in buyer interest—yet this year, buyers are taking a cautious approach, leading more sellers to rethink their pricing.
Notably, this marks the first increase in price reductions for January in over ten years.
Home Prices Face Pressure
Currently, the median price of new home sales contracts stands at $389,700—a 1% increase from last week and a mere 2.5% rise compared to the same week last year.
In the broader housing landscape, this 2.5% uptick is hardly significant; while some markets are seeing price gains, others are experiencing declines.
Meanwhile, the active market shows a median price of $424,900, unchanged from last year.
Future home price trends may hinge on economic factors such as government tariffs and consumer spending.
If the economy contracts, it could lead to lower bond yields and, in turn, mortgage rates.
History suggests a similar cycle occurred during the 2019 tariff conflicts, where a slowing economy prompted lower rates and boosted the housing market by early 2020.
While it’s tricky to forecast tax impacts or market reactions, the potential for economic instability to result in rising home prices—despite a sluggish economy—remains.
Expectations for gradual home price increases persist as we approach the main home-buying season.
Even with lackluster demand, we anticipate some uptick in prices come spring.
That said, market behaviors suggest a tough ceiling around the $400,000 mark established last May, limiting how much prices can rise this year.
Slight Inventory Decline
Currently, there are 635,000 unsold single-family homes on the market, marking a minor decrease from last week.
January typically sees such fluctuations as the market stabilizes before the spring rush, and we might have reached the year’s inventory low point.
Although we’re early in the year for supply increases, recent trends hint at a more pronounced uptick in inventory as demand slows.
More sellers are entering the market amid low demand, leading to a surge of 27.7% in homes available compared to last year.
This aligns with earlier forecasts predicting a 15% inventory growth for 2025, suggesting it might be closer to 17% by year’s end.
This week, just under 49,000 new unsold single-family homes entered the market, a drop from the previous week, yet still a 10% increase from last year.
Factoring in new listings already under contract, there are nearly 4% more sellers compared to this time last year—a bit underwhelming for a robust market.
While there’s been a steady rise in new sellers year-over-year, the numbers remain below historical averages.
For perspective, during the fifth week of 2020, just before the pandemic hit, new listings peaked at nearly 74,000—50% more than what we’re seeing now.
In summary, although the rise in new listings is encouraging, a larger influx of sellers would significantly boost market activity.
Home sales remain constrained by the lack of new listings.
Despite anticipated movement toward popular sunbelt areas, that surge hasn’t yet materialized this year.
This week saw 56,000 new pending home sales, an 8% increase from last week—on target for seasonal expectations.
Interestingly, this number is slightly ahead of last year’s figures, though overall sales are about 5% lower than at the start of 2024.
Any silver lining is welcome news in this market.
Currently, there are 282,000 single-family homes under contract, representing a 3.5% drop from last year.
Most pending sales are expected to close in February, indicating future reports may paint a bleak picture for home sales.
Looking ahead, if mortgage rates decrease by summer, we could see a rebound in home sales later this year, though that’s purely speculative.
Mark your calendars: Mike Simonsen, founder of Altos Research, will be a keynote speaker at the Housing Economic Summit in Dallas on February 26, shedding light on these evolving trends.
Source: Housingwire