One in three sellers in the U.S. has slashed the asking price for their home as the U.S. housing market is essentially stalling this month, according to Mike Simonsen, founder and president of real estate analytics firm Altos.
Why It Matters
The U.S. housing market is currently going through an affordability crisis. Home prices skyrocketed during the pandemic as demand surged amid a chronic lack of inventory across the entire country.
While rising mortgage rates have dampened demand since 2022, the country’s supply shortage has kept prices up, keeping many aspiring homebuyers off the property ladder.
The affordability crisis in the U.S. housing market was a massive topic during the 2024 presidential race and it is likely to remain an important issue for Americans this year, who are hoping that home prices and mortgages will finally come down.
What To Know
According to Altos data, an increasing number of sellers nationwide are lowering their asking prices to attract reluctant buyers, with 33.5 percent of homes currently listed for sale on the market having taken a price reduction from their original list price.
This number reflects a general slowdown of the national market as high prices and high mortgage rates keep buyers on the sidelines.
According to Altos data, home prices in January are so far only 0.5 percent higher than a year earlier, with the median price of new contracts pending coming in at $375,000.
Home sales have basically stalled in January.
Just 45,000 new contracts for single family home sales this week. 10% fewer than the same week a year ago.
Sales in Q4 had been trending 5-10% more than the year prior. All those gains are gone now.
Thread on the latest: pic.twitter.com/rw7efaFXhg
— Mike Simonsen 🐉 (@mikesimonsen) January 20, 2025
“Normally, this time of the year, you’d expect sales prices to be moving up each week,” Simonsen explained in a video published on YouTube on Monday.
“You get fresh new inventory, the first spring buyers are looking—that pushes sales prices higher in the first quarter, usually. But, this year, the pricing pressure is much weaker. Demand is weak, there’s no upper pressure on sales price.
“In normal years, home prices rise 5 percent or so over the prior year. This year is starting out much weaker for home prices than normal years, essentially flat.”
A “for sale” sign is displayed outside a home on August 16, 2024, in Los Angeles, California.
PATRICK T. FALLON/AFP via Getty Images
A cooldown in the growth of home prices is likely linked to a slowdown in demand.
According to Simonsen, “home sales have basically stalled in January,” with 45,000 new contracts for single-family home sales over the past week—10 percent fewer than the same week a year ago.
“Sales in Q4 had been trending 5-10 percent more than the year prior. All those gains are gone now,” he wrote on X.
Sellers are also facing a flow of new inventory into that market which might be pushing them to lower their asking prices. According to Altos, there were 46,000 new listings this week, “plus another 7,000 immediate sales,” Simonsen said.
“There were 3.6 percent more unsold new listings than a year ago,” he added. “Inventory growth is from demand weakness rather than supply growth.”
What People Are Saying
Matthew Walsh, an economist at Moody’s Analytics, previously told Newsweek: “For the year ahead, we expect continued slowing in house prices. To put some numbers to it, by the end of 2025, we expect somewhere between 1 to 1.5 percent year-over-year price appreciation.”
Kara Ng, a senior economist at Zillow, previously told Newsweek: “As long as the economy remains strong and wages continue to grow, affordability looks like it will improve given those modest expectations for home value growth.”
What Happens Next
As mortgage rates continue to tick higher and home prices remain near their pandemic peaks, demand is, as Simonsen said, dwindling.
A Redfin report found that last month pending home sales dropped by 4.5 percent compared with November—the largest drop since October 2022—and roughly 40,000 home purchases were called off, which was the highest December percentage on record.
As of the week ending January 16, the 30-year fixed mortgage rate was 7.04 percent, according to Freddie Mac.
In a statement included in the report, Redfin senior economist Elijah de la Campa warned that “homebuying activity will likely slow further in January due to the wildfires impacting Los Angeles—the nation’s second most populous metro area—and winter storms impacting the Mid-Atlantic and Southeast.”