2025 could be the last year of housing stock shortage

Inventory

Available inventory of unsold single -family homes in the US this week almost half a percent climbed to just over 640,000. There are now 28.7% more houses on the market than a year ago. This is the supply expansion I was talking about.

However, the mortgage interest rate is currently climbing to their highest level of the year in 2024. The mortgage interest rate is now lower than a year ago.

Because the rates in 2023 in February, March, April, rose to 7.5%, the inventory grew fairly quickly every week. By the end of May there were 38% more houses on the market than the year before. This year the rates will be lowered slowly, so the expansion of the inventory will be covered a bit.

We expect 18% stock growth by the end of the year.

Texas and Florida, who led stock growth last year, are no longer the fastest growing states for unsold inventory. Are California and Arizona. California and Arizona have now not sold 45% more houses on the market than a year ago. Texas has only 31% more houses on the market. This is a big shift of last year’s trends.

This illustrates which areas are more mortgage speed sensitive. Texas and Florida exploded in unsold houses when the mortgage interest rose and are now being hit relatively less. California has had more steady growth in unsold houses. If Texas and Florida are more sensitive to rates, you can imagine what happens later this year if the rates fall or rise considerably.

In this graph we look at 10 years of inventory throughout the country. At the extreme right -wing end you can see that the inventory is starting to make inches for the spring.

I emphasized last year when there were only 500,000 single -family homes on the market. I also emphasized 2018 when there were 775,000 on the market in February 775,000. Assuming that the mortgage interest rate will remain higher for this year, we will probably see the level of 2018 again in the following spring.

You can see three different phases in the stock graph. The left side of the graph is that in the last decade the mortgage interest rate fell most of the decade. The more rates fall, the more we want to have real estate. As we possess more, the available inventory of non -sold houses decreases. That is the first phase.

During the pandemic, that dynamic was supercharged. The rates fell to ultra-run levels, so we wanted to possess every bit of real estate. Inventory hit record Lows when we bought everything in sight. Now we have had rising interest rates and rising inventory for three years. It seems that after four years of increased mortgage interest, the market is finally normal again from unsold houses on the market. That is next spring.

As we approach that threshold of old levels of unsold houses on the market, it raises those questions about house prices.

New offers

To get many houses on the market, although we need some sellers. Only 54,000 new lists with single -family homes were not sold this week. That’s not a ton.

There were another 10,000 new offers immediate sale that makes 64,000 homesellers. In total it was another week with fewer home sellers that last year. It is difficult to grow too much inventory if there are not many sellers.

Non -sold new entries amount to 4.8% more than a year ago. The demand is slower, so that more of the sellers are on the market. There are less immediate sales that go directly into contract.

In this graph we show those unsold new entries every week. It is slightly more than in 2024 or 2023. I continue to interpret every growth of sellers as a good sign for a healthier housing market. As always with the new list data, we are vigilant for every signal from many sellers or a kind of flood that would change the dynamics of the supply request quickly.

The current one to keep an eye on is whether a lot of federal government leads chaos to greater unemployment or financial need for Americans. Does that lead to a change in the number of people who have to sell their house? There are early signs that unemployment in the Washington, DC, metro, for example. Are those people suddenly going to sell their houses?

There is a time delay between unemployment and inventory. Despite social media Hysteria, the Washington housing market, DC, the housing market, does not show any signs of a stream of sellers, absolutely none.

This is what a timeline could look like. Let’s say that this spring in 2025 we see a huge peak in unemployment. While people lose their jobs, they clamber, they get unemployment insurance and look for new work.

However, they usually do not rush to sell their house for a week after they have lost their jobs.

If the economy has really been refueled and you have been without work for months and the future employment looks doubtful, then you start making financial arrangements. Once you are about six months or more without work, mortgage payments are missed. That is when you start working with the bank. After a few months of that process, the ailing sale starts.

When you add it all together, this really means that if the great unemployment strikes at the moment, this is 2026 stock growth. And although unemployment increases, it is still quite low. Americans have jobs.

This time the sales cycle of the Economy Work and Employment-Location has an extra wrinkle that are homeowners who all have ultra-low mortgage interest. So selling their house would bring them to a worse cash flow position.

In normal recession cycles, homeowners can exchange a high mortgage payment for a lower rent payment and help correct the cash flow, but that is usually not true now. So it may be that even if crazy policy changes into a large recession of job losses, homes from homes can be much more limited than you would expect.

We are approaching the total stock levels where house prices may have to adjust. Is there a sign of a stream of sellers who will accelerate those stock profits? From now on there is not that. But we always remain vigilant and measure every week.

House prices

In the meantime, with a larger range of unsold houses, house prices are hardly positive compared to last year.

House prices are now about 2% higher than in February 2024. This week the median price of the new contracts amounted to $ 385,000. That was just a smidge from last week and is 2.6% larger than the same week a year ago.

The house prices are compressing. Nationally it is not correct to say that house prices are falling. They are higher than last year, but the growth rate has fallen. In 2024, house prices increased 4% during the year before, now it is only about 2%.

There have recently been time when house prices fell. It happened in 2022 and you can see it here in this graph.

On the left side of the graph is the purple line for 2025. We measured $ 385,000 as the median prize for this week’s home sales contracts. House prices generally rise for the spring season to peak in June before they slide down in the back of the year. In 2022 that is the green line here. There were remarkable moments when house prices fell. House prices were adjusted every time in September in June and again in September with large mortgage peaks. That doesn’t happen now.

Here in the spring of 2025, house prices are slightly higher than a year ago, but hardly any. That is why it seems that a further increase in the inventory seems to be necessary before the house prices become national negative.

As long as the mortgage interest rate remains increased, we must be aware of this pattern for house prices. If the rates from here worry, because of something like the inflation that comes high and the yield on 10-year-old treasury jumping, then mortgages may reach 7.5%again.

If that happens, I expect to see the house prices adjust as you can see in the 2022 line here.

On the other hand, the mortgage interest rate have been Slow lower income About a month. If we are lucky and the rates remain closer to 6%, then the pattern will probably stop and house prices would probably have some resilience such as last fall.

You can see the impact on the house prices in the Blue Line here for 2024. After the short September DIP in the mortgage interest rate, almost 6%, sufficient demand for buyers was encouraged that house prices were increased in the fourth quarter. 2024 had the opposite pattern from 2022 at the end of the year.

Home Sales

House prices have fallen this week and the sale of the house also fell for the week. We had 57,000 new contracts awaiting single -family homes plus another 12,000 Condo sales. That is 6% less than last week and 5% less at home sales than the same week a year ago.

The sale of living will generally continue to climb weekly for spring. We should see a rebound to 60,000 or so in next week’s data. What we hope for is not materialized.

In this graph we would like to see that the purple line is consistently above the blue line for 2025 for 2024. Growth in home sales would be a good sign for the market and the economy.

But because that did not happen, there are now 313,000 single -family homes in contract, which is fractional less than a year ago. In the fourth quarter of 2024, the sale of houses had built up some growth, but that growth has now disappeared.

As I said before, the mortgage interest rate is one month lower and are lower last year. However, rates are still almost 7%.

The bottom line for the sale of home is that there is no sign of growth before 2025.

Price reductions

In the meantime, leading indicators for future selling prices also confirm this pattern that I have described. The share of houses on the market with price reductions tapped its week again with 20 basic points to 33.2%.

There are now more houses on the market that have taken price reductions from the original catalog price than in recent February. That is a very clear explanation about the demand for home buyers versus the available supply at the beginning of 2025.

I have been talking about this data point for several weeks now and the trend will continue here in the end of February. In most years in February you will receive a new new offer and you will receive the first demand for spring buyer. As a result, there are usually fewer price reductions every week in the first quarter in the first quarter. This year there are more price reductions every week.

In the graph you can see the purple line for 2025. Price reductions are now more common than in previous years and raised for the week. The most obvious contrast is with the green line from 2023, where the market found surprising force. In 2023, the price reductions improved until the end of April. This year it was January when sellers started reducing the prices more.

Price reductions now measure the houses on the market, where sellers see a weak question. A price reduction today will hopefully generate an offer in March for a sale that closes in April. The data from the price reduction tells me that we have at least a few months of weak prices for home sales.

If the mortgage interest rate does not cooperate and at the end of spring is still approximately 7% or higher, this will be shown in this price reduction data. It will also appear in the inventory data and it will give us visibility about the possibility that house prices will fall for the calendar year of 2025. Stay informed.