What to expect from the housing market in 2025
To be honest, it feels like the housing market is shrinking a bit in November. After the hurricaneswe were hit by rising mortgage rates and then by the elections. After the election, we saw a small recovery in new listings, but it was actually less of a recovery than I expected. A few more vendors joined, but my gut feeling is that many are done for the season and may try again next spring.
Sales of houses
Last week we counted 53,000 new contracts pending for single-family homes, with another 11,000 apartments sold. That’s an increase of almost 3% for the week after the election break.
Recent average weekly sales of single-family homes have fallen to 56,000 new pending single-family home sales per week. Home sales are on average almost 10% higher than last year, but October 2023 was very weak in terms of transaction volume.
We’re still forecasting slight growth in overall home sales in 2025 – probably only 5% more than in 2024. In the chart below I’ve used a four-week moving average of home sales to smooth out the weekly noise, but you can see that sales are slightly ahead of last year. There’s not much growth here: 52,000 new listings in a week and 53,000 sales.
House prices
The average price of new sales starting last week was again $380,000 – no change from the previous week. So the number of new listings increased, the inventory increased, the sales rate improved, but the price remained unchanged. According to this measure, house prices at this time are approximately 4% higher than last year.
Price reductions
Below is an overview of price reductions that I don’t think I have shared before. Normally we talk about the percentage of homes on the market that have experienced a price reduction. That percentage has peaked this year and now stands at 38.8% of homes on the market. But instead of the percentage of listings, let’s look at the extent to which those listings need to be reduced in price and see if that gives us any new information.
Currently, home sellers who take a price reduction are down an average of just over $15,000 from the original list price. If you think about the average home price in the US, which is now $430,000, that’s a price drop of 3.5%.
In this graph we see the absolute level of price reductions to watch, and the change in the amount. And right now, fewer dollars are being cut and there has been a seasonal decline leading up to the last two years. This is another signal for house price stability as we look towards the 2025 housing market.
Mike Simonsen will be a featured speaker at the Economic top in the field of housing in Dallas on February 26. Read more here.
