01/09/2025
Pending Home Sales at Highest Level in 2 Years -2024 Recap
What This Means for Buyers in 2025
The key takeaway for buyers entering 2025 is that expectations around mortgage rates have shifted, and many are taking advantage of increased inventory and improved negotiating power. The market is starting 2025 with signs of increased inventory, seller activity, and slight sales growth.
Recent data highlights this trend:
Pending Home Sales: November marked the fourth consecutive month of improvement, with contract signings up 2.2% month-over-month and 6.9% year-over-year. This is the highest index level since February 2023, signaling a meaningful shift in buyer activity despite elevated mortgage rates.
Market Dynamics: Buyers are adapting to the reality of rates consistently above 6% over the past two years. With more homes on the market and less competition, negotiating power is swinging back toward buyers.
According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR):
“Consumers appeared to have recalibrated expectations regarding mortgage rates and are taking advantage of more available inventory. Buyers are no longer waiting for or expecting rates to fall substantially, positioning themselves to negotiate better deals as the market shifts.”
Why This Matters
Improved Opportunities: While overall activity remains historically low, buyers now face less competition and a growing selection of homes.
Market Shift: The transition away from a seller’s market provides buyers with leverage for the first time in years.
Preparation Pays Off: Those who adjust to the current rate environment and enter the market strategically may find better opportunities than those waiting for significant rate drops.
Looking Ahead
As affordability remains a challenge, keeping a close eye on inventory trends and mortgage rates will be key for buyers navigating the 2025 housing market.
2024 Recap and Housing Market Trends for 2025
As we close the books on 2024, the housing market continues to defy expectations. Entering 2025, two key trends dominate the landscape:
1. Affordability Challenges Deepen
National home prices rose modestly in 2024, while mortgage rates climbed back above 7%, marking their highest level in seven months. With the typical monthly mortgage payment now at $2,290—a record high for the start of a year—housing affordability is at its worst in decades.
Though a few markets in the South saw slight price declines, no major correction appears imminent. Sales growth seen in late 2024 is under threat as affordability constraints push homes to sit 20% longer on the market. Unless interest rates ease, affordability will remain the housing market’s primary pressure point.
2. Seller Activity Shows Signs of Recovery
Post-pandemic years have seen a persistent shortage of sellers, with weekly new listings around 60,000—far below the 80,000 typical pre-pandemic level. However, December 2024 brought higher-than-expected new listing activity, with 32,500 homes added to the market in the final week—33% more than the same week in 2023.
While this uptick isn’t a flood, it’s an encouraging sign that seller activity is normalizing. Gradual increases in inventory could ease some market tightness in 2025.
Housing Market Data: December 30, 2024
Inventory
Current Level: 651,000 unsold single-family homes, down 2.5% from last week due to holiday seasonality.
Trend: Inventory may dip slightly in January but is projected to rise steadily in February. Markets across the country, especially in the Sun Belt, are seeing inventory growth.
New Listings
Volume: 32,500 new listings last week—the highest for the same period in over six years.
Trend: December 2024 consistently saw stronger listing activity compared to recent years. Immediate sales (homes sold shortly after listing) were at their lowest since the pandemic, signaling subdued buyer demand during the holidays.
Pending Sales
Current Level: 269,000 homes are under contract, a 4.25% increase from the end of 2023.
Trend: Pending sales are 1.3% above last year’s pace. However, buyer sensitivity to 7% mortgage rates could hinder further growth. A seasonal uptick in January is expected but may face headwinds from affordability challenges.
Home Prices and Affordability
Median Price: $395,000 to start 2025, up 4% year-over-year.
Insight: Despite high inventory and low sales, home prices remain resilient due to factors like seller psychology and market fundamentals. Historically, year-over-year price declines are rare, and current data does not suggest an imminent correction.
Price Reductions
Current Level: 36% of listed homes have reduced their prices, slightly higher than last year.
Trend: Price reductions will likely decrease in spring as new inventory enters the market. However, sustained 7% mortgage rates could dampen buyer activity, forcing some sellers to make additional price cuts.
2025 Market Outlook
Key questions for 2025 include:
Mortgage Rates: Will rates remain above 7%, further straining affordability?
Seller Activity: Will the gradual increase in new listings persist and ease inventory shortages?
Buyer Sensitivity: How will affordability challenges affect sales momentum?
The market is starting 2025 with signs of increased inventory, seller activity, and slight sales growth. However, affordability remains a significant obstacle. The coming weeks will provide critical insights into how the year unfolds.
Stay tuned for updates as we monitor the data and trends shaping the 2025 housing market.
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