Did the momentum in home sales tighten in December?

New Year’s week was expected to be slow, so it’s no surprise that new listings and sales were down. Those will begin to multiply in next week’s data.

The Christmas and New Year holidays fall on a Wednesday this year, making for a busy two weeks for real estate sales and tracking numbers. At the same time, mortgage rates went back over 7%.

In the four weeks of December 2024, there were 44,000 new pending home sales on average for single-family homes. By 2023, that average was less than 44,000 a week. There are approximately 5% more homes in the pending sale pipeline than last year. I think you’ve been hearing that lately, with headlines reporting growth. If the numbers for December come out of the usual sources, they will still report sales gains. It takes 30 to 45 days in the sales process before the sale closes. What we’re trying to track is what real-time signals are telling us about home buyers and 7% mortgage rates.

Study of Altos tracks every home for sale in the country every week – all active inventory and pending sales as they happen – along with prices and supply and demand metrics Let’s take a look at this week’s data.

Inventory has fallen

There are 635,000 single family homes for sale on the market right now. Inventory falls quickly around the holidays, so this week there are 2.4% fewer homes on the market than last week.

Most years have a slight increase in inventory during the second week of January. I expect that next week, but then I’ll dip again later in the month. There is no new volume to be listed at the beginning of the year. In “normal” years, it will be early February before inventory hits its lowest point and begins to rise in the spring. When demand is hot during the peak season, inventory may not reach its lowest point until March or April. At that time, we already had more buyers than sellers. That is not true now, so we should expect the inventory to start building for the year in February 2025.

What are the other symptoms of the current list levels? There are 27% more homes on the market now than last year. As we enter the year with mortgage rates above 7%, that could dampen the demand to buy. If inventory starts building consistently in January — earlier than normal — that will tell us a lot about next year.

The total number of unsold homes on the market at the beginning of 2025 is 18% lower than at the beginning of 2018, seven years ago. In 2018, loan and inventory rates increased throughout the year. When prices rise and stay high, like in 2018 or the last three years, inventory grows.

With no sign of mortgage rates dropping significantly, we expect inventory to continue rising through 2025.

The holidays are a really slow time for new listings of course. We will see a slight jump in the listing data for next week. So let’s take the opportunity to look at a slightly different view of trader volume. I haven’t shown this idea in a while. We counted less than 20,000 single-family homes this week. The New Year’s holiday on Wednesday delays everything.

We can track new listings in two groups: those that are listed and are now active properties awaiting offers. Also, those that sell quickly. This is a new listing that takes offers within a few days of listing and goes into contract quickly. They are not in active inventory, they are already in the sales process. We started tracking sales during the boom period, as the market at that time was flooded with multiple offers and bidding wars. Consumer competition has led to all kinds of madness. That competition is almost gone now and the current sales are almost gone, too. We only counted 2,700 quick sales this week.

About 13% of new listings sell quickly now. That’s down from 35% during the crisis when one in three homes sold as soon as they hit the market.

An increase in pending home sales

That’s the supply side. Let’s look at the demand slider. This is where we look to see if the trend is changing.

There are 260,000 single family homes currently under contract. That’s about 5% more than last year. Any growth in sales beyond 2024 is welcome, but the total number of pending home sales is still 35% lower than when we started 2022 at the end of the pandemic.

A little growth seems to be in the works for this year. And like I said, holiday weeks are very difficult to measure accurately. But, if we look at the recently established sales of December, December 2024 shows no growth in sales over the past year.

It seems to me that the house buying momentum has faded in December. I have no way to tease out how much of the recent weakness in sales momentum is due to pricing or holiday placement. But starting next week, each week gives a clearer and clearer signal about how sensitive homebuyers are to the cost of money right now.

At HousingWire we forecast a 5% growth in home sales by 2025. Home sales of 4 million in 2024 grow to 4.2 million in 2025. The latest data is worse than that prediction.

Home prices remain strong

At home prices. Home prices remain stable nationally through 2024, a year in which the supply of single-family homes for sale has increased by 150,000. Home prices ended the year up nearly 4% by the end of 2023.

The median price of homes going into contract now is just under $377,000. See on the far left side of the chart, the 2025 line starts a year ahead of previous years. That’s only 2.3 percent more than the same week last year. This is a national outlook, so some markets, such as the northeast, have seen house prices increase by 10% by 2024.

We expect the general trends from 2024 to continue into 2025, but to be less pronounced. Home prices will likely rise nationally, but move lower in 2024.

Days on the market continue to increase

Homes have been on the market for about 80 days now, 78.7 days. That’s about 20% longer than last year. During the epidemic it came down to about 20 days from the height of madness. This measure takes time to adjust because in the off-season some homes stay for months.

Later in March, when we have the freshest listings, new listings every week and demand, that’s when days on the market start to dwindle this season. Home buyer demand peaks at the end of June, so the market time cycle begins to pick up again in late summer.

A final note on days on market: In the Altos data we track total days on market. If the home has no offers, and is pulled during the holidays and re-listed in the spring, we will calculate the full term. Sometimes sellers test the market and withdraw listings that don’t get offers. There’s not a crazy amount of withdrawals right now, but that rate is a little high, so we’ll see some relistings this spring again which will make the market value days higher.

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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