Sales are slow, so unsold housing is being built. Condo inventory is growing faster than single family. Some markets are much slower than others. Let’s take a look Study of Altos data for this week, mid-January 2025.
Inventory is high
There are now 632,000 unsold single-family homes on the market around the US That’s up 1.25% from last week. There are about 25% more unsold homes than last year. As I mentioned, the inventory of unsold condos is growing faster than that of single-family homes. There are 177,000 condos on the market. That’s 30% more than last year.
It’s not uncommon for inventory to show up in mid-January as it did this week. The holidays are over, some of the spring inventory is coming out, and there aren’t many sales yet. It is also common for inventory to dip again before the end of the month. And you can see that in the pattern for each year here.
Spring growth usually begins in the second week of February. When the market is hot like during the Pandemic – there were more buyers than sellers in Q1 – so the inventory kept going down until March or April. Generally, we expect that transition week to be in early February.
One signal I’m watching for this current market is that inventory is building as of now. If next week’s inventory rises again, that will be yet another sign of weak demand due to higher mortgage rates. Our model expects inventory to bottom out next week, as it would in a “normal” year. Stay tuned for that next week we’ll get another clue.
New listings are less than last week
Inventory is building because of weak demand, not because of increased supply. In fact, it appears that high mortgage rates are holding back new listings, too. There were only 46,000 new listings for single-family homes this week and another 7,000 sales.
Current auctions are those that are listed and take bids within a few days, so they are no longer in active inventory. There were 2% fewer sellers now than the same week last year but 3.6% more new unsold listings than last year. So, fewer sellers, but the inventory is growing faster than last year.
There are two risks to this housing market that we should look for in the new listing data each week. Are there too many or too few vendors? Very few sellers keep the market limited and raise the prices. That has since changed. Most of last year there were 5% to 10% more sellers than the year before. We expect that to continue.
On the other hand, if we see a flood of sellers – too many sellers – that can quickly increase inventory and potentially cause housing prices to fall. I do not expect this situation.
I should point out that the Los Angeles fires don’t really move the needle on the national housing number. For example, there are less than 10 new listings each week in Pacific Palisades even in the height of summer. Although many homes have been destroyed, the owners of those homes usually do not sell them. Therefore, the impact of the Los Angeles fires will be extended over months and years, but it will be difficult to see it in weekly numbers like the statistics of new listings. It was much easier to see the impact of the storm because Tampa and Western Florida have a stronger housing market than California.
Pending home sales are slow
Let’s look at real estate sales, which is a current issue. There were only 45,000 contracts started for single family purchases this week. That’s 10% fewer sales than the same week last year. This is a very slow start to the new year.
Overall, the number of homes in the pending contract phase is just over 257,000, which is about 2% less than last year. Weekly readings have been falling for over a month or so now the entire contracted set is down.
In 2024 we counted 49,000 new ones waiting; this year we are about 45,000. Mortgage rates jumped into the 7s in December, and we saw it.
Home price gains are evaporating
The sales growth we measured in Q4 is over, and home price gains through 2024 look to have largely evaporated, too.
The median price of those homes that went into contract this week — pending new home sales — is $375,000. That’s essentially unchanged from last year, up just half a percent. Generally, at this time of year you can expect sales prices to increase each week. You’re getting new inventory, the first spring buyers are looking, and that’s driving up sales in the first quarter – usually. But this year, the price pressure is very weak. Demand is weak and there is no upward pressure on retail prices. In typical years, home prices increase by 5% or more over the past year. This year is off to a much weaker start to home prices than normal years.
The median price of all 257,000 homes under contract is $394,000. That figure is still 3.6% higher than last year. Many of these entered into contracts in November and December. The implication is that even though the real-time signals are bearish on home prices, the January headlines when news comes out in several months of metrics – such as the Case-Shiller Index – will still show positive movement at home. values.
Also, the real-time rate is for pending contracts – the stage before the sale closes. The pending price is the best early proxy for near-sale prices. We can also look at the leading data. For example, we can look at a collection of homes that were recently listed in a given week and see where those are priced. If we look at it, the new lists do not show much hope. The median price for a newly listed group this week came in at $409,000. That’s a weekly increase but it’s only 2.5% more than a year ago.
The price of mortgages is that everything is under pressure with mortgage rates above 7%. Pricing metrics have not been negative, but could be soon.
The price reduction tells the story
Looking at the leading indicators of future sales prices, I track price reductions. This week, the percentage of homes on the market decreased by only 50 points. There is a drop in new listings and those in the market are making further price drops. This does not correlate well with future sales prices. Usually around this time of year, you’ll see more pricing power with new listings and other sales. You can really see the home buyer’s market standing right now in the price reduction metric.
There are 33.5% of homes on the market that have taken a price reduction from the original listing price. Last year, it was only 31% and that number has been dropping rapidly each week as more sales are made.
As I said this week we saw 10% fewer offers than last year. That’s thousands of sellers who didn’t get an offer this week. Many of those choose to lower their price to see if they can generate demand.
At this time of the year, the discount line usually drops with new inventory. Newly listed homes do not drop in price until they have been on the market for a while. But this trend is now catching all those who feel constrained by high loan rates. We see that buyers are waiting.
Mike Simonsen is the founder of Study of Altos and will be a featured speaker at Housing Economic Summit in Dallas on Feb. 26. Read more here.
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