As the year draws to a close, available unsold inventory of homes on the market is nearly 27% greater than a year ago. Almost every market in the country has more homes available now than at the end of 2023. Ten states have more inventory unsold than in 2019, which was the last sort of “normal” year before the pandemic. A few states have more homes on the market now than any time in the last eight to 10 years.
I’ve also pointed out recently how the midwest and northeast states do not have a lot of homes on the market. Inventory is still very tight in places like Chicago and New England, but it is rising in these markets. And 2025 is poised to continue the trend of rising inventory across the country. We’ll probably finish 2025 with 15% more homes available than we have now.
So, what happens when inventory rises for four years in a row? Can there be too many homes for sale? How will that impact home prices in 2025?
Let’s look at last week’s data and see if we can tease out the signals for impact on the 2025 housing market.
Housing inventory
It is December, of course, so inventory is falling for the season. There will be fewer homes on the market each week until February or so. There are now 682,000 single-family homes on the market across the country. That’s down 1% for the week but it’s almost 27% more homes on the market now than last year at this time.
In this long-term view of inventory, you can see a few trends that are important.
We’re finishing three full years of rising inventory and 2025 is poised to keep the trend. As it continues, we’re slowly getting closer to the old normal levels. While we have 27% more homes for sale now than last year, we have 22% fewer homes on the market than at the end of 2018. By the end of next year we should be basically back to the old normal levels of inventory.
If a big recession hits in 2025, it would typically take nine to 12 months for that to create inventory, so that would be 2026 before we’d see a surge of homes for sale from a recession. That means 2025 inventory will likely grow but not shoot dramatically higher.
Other takeaways on the inventory data at the end of the year:
- I expect more homes to be available next year, which means greater selection for homebuyers, and less competition.
- I expect inventory to grow more in the north and midwest next year with some resumption of migration from the north to the south, which has slowed recently. This is somewhat speculative, but based on the fact that we’ve been stuck for so long in those areas.
New listings
When we look at the sellers entering the market, there were 45,000 new listings last week. That is 14% more home sellers listing their properties in December than the same week a year ago. This quantity of sellers is more similar to the pre-pandemic years than we’ve seen in a long time. We have a growing number of sellers each week compared to last year.
This to me is an indicator that we’re slowly emerging from the post-pandemic era. When we include the immediate sales, the overall seller growth is 7.7% more than a year ago.
All year long we’ve been averaging about 8% more sellers each week than last year. That trend looks like it’ll continue into 2025. More supply means more selection for buyers, it means less upward pressure on prices, and in some markets, more seller supply means home prices will move down in 2025.
Home sales
Meanwhile, there were 47,000 new contracts started for single-family home sales in the last week. That was a little bounce up from the week prior and 3% more sales started than the same week a year ago. These December and January weeks are the lowest for the year, of course, with home sales only in the 30,000 or 40,000 range per week for the next month or so.
This month is averaging 50,000 new contracts pending each week, which is actually 10% more home sales than last year. In the chart above, we’re showing the average weekly sales rate for single-family homes.
Recent weeks have been averaging about 10% more home sales than last year. Our current expectation is that pace probably isn’t sustainable for the full year, so overall for 2025, home sales will grow about 5% over this year for a total of 4.2 million existing home sales for 2025.
Home prices
The median price for existing home sales in the U.S. was $375,000 last week. That’s a downtick for the week, as is totally normal for December.
The recent average price is just under $384,000. That’s what people are paying for homes across the U.S. this autumn. In the chart above, we have each of the last three years and we’re using the last four weeks of data to smooth out the weekly jumps and dips. I think this is a very clear sign for where home prices finish 2024 and start the next year — with about a 5% gain.
HousingWire’s 2025 forecast expects a 3.5% home price gain for the full year next year, but since we haven’t seen prices receding from the current pace, we will be on the lookout to revise UP our home-price forecast in the first quarter if these trends hold.
Price reductions
The current sales price data seems more bullish than I’ve been recently. The price reductions data, which is a forward-looking leading indicator for future sales activity, is not super bullish though. This measure only fell by 20 basis points last week to 38.2%. That’s 38.2% of the homes on the market now which have taken a price cut from the original list price.
Normally at this time of year, 35% of homes have a price cut and that’s falling quickly each week for the holidays. This year, the number hasn’t fallen much yet, which is something to keep an eye on.
The cooler markets in the U.S., as measured by price reductions, have shifted from Florida to the Western cities again. Florida has its unique seasonal activity, with more transactions happening in the winter than most of the country. As of right now, like the rest of the U.S., most of the Florida markets have resisted dramatic price drops, and there’s no immediate signal of that changing. We’d see that signal in this price reductions data, and we just don’t yet.
After the new year, we’ll watch how steeply this number drops with fresh inventory in January and February and we’ll see how quickly it kicks up in Q2.
Mike Simonsen will be a featured speaker at the Housing Economic Summit in Dallas on Feb. 26. Learn more here.
