More home sellers, but fewer home sales

There were 45,000 new listings for single-family homes nationwide this week, a huge jump. That's 12% more sellers than a year ago. This is the trend that will be the theme of 2025. It seems like more sellers are coming out every week and that will keep the inventory going up.

this week it was close to 7.25%. We're only two weeks into January and mortgage rates are at the high end of our forecast range for the entire year. Unlike many forecasters in the mortgage world, our forecast a few months ago included the idea that the bond market could indeed push mortgage rates above 7%, with some inflationary fears. That's exactly what happened – quickly.

We are optimistic that the economic news will ease somewhat later in the year and rates will fall closer to 6% or even below that. These scenarios are possible and it will be interesting to see how bond markets react. The mood is low right now. Bond markets have returned to highs and are suffering. Sellers are up, but sales are down.

Impact of the Los Angeles fires

Before we get into this week's data, I should say that the impact of this is something we will be studying. While it is too early to see any changes in the data, there are some signals to watch for. The first thing to note is the very limited inventory. Before the fires, for example, there were only 17 homes for sale in all. That's unlike the hurricane that hit Tampa, where the market was big enough to spike the national numbers. There are only 6,000 homes for sale in all of LA County, which represents about 3% of the nation's population and less than 1% of homes for sale.

One way this disaster may have affected the national numbers is that many of the thousands of homes destroyed were $3 million homes. There are only 16,000 houses in the country above this price. Over time, we could see the impact of demand for limited homes in this price range in other parts of the country. We may see the resurgence of Zoom cities like Boise and Salt Lake City, which have emerged as destinations for people fleeing Southern California during the pandemic.

We'll also be watching things like price appreciation in LA to see if the rest of the homes for sale in the area see price increases due to the sudden flood of movers.

Our hearts go out to everyone affected by the fires. I have friends who have lost everything and it is tragic. In our work over time HousingWire It will be about helping everyone understand the market and the financial impact we can measure.

Let's take a look at this week's data:

Inventory drop

Total inventory fell by 624,000 single-family homes on the market this week. Total inventory has decreased because of withdrawals, not always because of purchasing demand. It's early in the year and the New Year's market is still emerging, but I expect an increase in inventory next week.

There are now 24% more homes on the market than a year ago. We expect inventory to increase through 2025, ending the year with about 15% more homes on the market.

If we stay in the 7s for a long time, we expect the inventory to increase faster and we will have to reconsider our higher level. Inventory is down this week, so we'll see what happens next.

New listings are popping up

The supply story should consider new sellers every week. There were 45,000 new listings for single-family homes nationwide this week, a big jump from New Year's week.

There are 12% more sellers this week compared to the same week at the beginning of January 2024. It seems like more sellers are coming out every week and 10-12% more sellers every week gets us back to normal pretty quickly. More sellers than that could cause price pressure. Home prices may fall.

We should note that there were more new condo listings this week than we've seen in the same week in January in 10 years.

I don't expect an influx of new sellers, but we are seeing growth. There were 45,000 new listings this week, if there are over 50,000 new listings next week that would be remarkable.

A decline in pending home sales

There were 41,000 new pending contracts for single-family homes this week. This was 3% less than the same week a year ago. So there are 12% more new listings and 3% fewer sales starts. This is a very noticeable change compared to the end of last year.

There are a total of 252,000 single-family homes pending contract. This is largely unchanged from a year ago.

I talked about how we were during the year. That translates to 4.2 million home sales in 2025, up from 4 million. That's the momentum we had in the fourth quarter, but January starts with no gains. This prediction is something we have in mind. Mortgage rates continue to rise and we can definitely see the impact on transactions.

Home sales should pick up next week as spring approaches.

House prices are slightly lower

Homes that went under contract this week averaged just under $375,000. This was slightly lower than a week ago and almost above the prices paid a year ago. By this measure, weekly new expected prices were about 4-5% higher than a year ago. They are now looking at 2% annual growth.

The demand effect we can see with transaction volume is reflected in lower sales and also weaker selling prices. With more homes on the market and fewer offers, home prices are undervalued.

The median price of all homes under contract is $395,000, down 4% from a year ago. Those 252,000 home sales will mostly close in January and February.

The bottom line on house prices is that as we head into the new year, there is almost no momentum for house prices to rise right now.

Discounts are coming down

As we begin the new buying season, new inventory is being listed and many older items are being bought back for the holidays. As a result, the percentage of active listings with price reductions will continue to decline over the next few weeks. Although we have seen weakness in sales prices, there are relatively few sellers who are making price cuts each week. 33.9% of homes on the market this week had price reductions from their original list price.

Watch the slope of the change in addition to the absolute level over the next few weeks. There will be more fresh inventory next week, so the percentage with price cuts will be less. But if a bunch of existing listings don't get bids, they'll lower their prices and the slope of the dark line will be less steep. That's what I'm waiting for.

There is little in the data right now that sees home sales or home prices higher. Signals are pretty low right now. Stop there.

Mike Simonsen is the founder and will be a special speaker Housing Economic Summit Feb. 26 in Dallas. Learn more

Related