One in three homes listed for sale on the U.S. market has taken a price cut from the original listing, according to founder and president of real estate analytics firm Altos Research Mike Simonsen.
“We’re noticing in the data, some signals say home prices nationally could turn negative this spring, showing year-over-year home price declines for the first time since early 2023,” Simonsen said in a video published on his YouTube channel on Monday.
3/ New Listings
➡️ 51,000 new listings (SFR) this week
➡️ That continues the trend we know for 2025: more sellers each week. In total 4% more sellers than last year.
➡️13% more new listings unsold than in 2024 pic.twitter.com/NMOkMDdvEZ— Mike Simonsen 🐉 (@mikesimonsen) January 27, 2025
Why It Matters
The U.S. is facing an ongoing housing affordability crisis spurred by a historic shortage of homes, rising prices, high mortgage rates, and years of pent-up demand. A widespread lack of inventory has kept prices up even as the Federal Reserve’s aggressive rate hike campaign sent mortgage rates skyrocketing after March 2022 and the number of home sales dwindled.
As mortgage rates are still hovering around the 7 percent mark despite recent cuts by the Fed, aspiring homebuyers remain cautious before making a purchase. Simonsen’s data shows that sellers are being forced to meet them where they are, especially as inventory is expected to increase in many parts of the country.
What To Know
Widespread price cuts in January are among the signals suggesting that home prices could slide down across the country this year, according to Simonsen.
“We use the percentage of homes on the market with price reductions as a leading indicator for future sale prices,” Simonsen said. “Right now, 33 percent of the active listings have taken a price cut from the originally listed price. Last year this time, it was 31 percent, so more sellers now are facing an absence of buyers, they feel it necessary to reduce their asking price.”
In January 2023, when the housing market was facing a short-lived price correction that ended by springtime, the percentage of homes on the market with price reductions was 33.9 percent.
Stock photo: A home is advertised for sale in a residential neighborhood on August 15, 2024 in San Jose, California.
Loren Elliott/Getty Images
“The weakest pricing moment of the past three years was the fourth quarter of 2022,” Simonsen said. “By January 2023, price cuts were still elevated, but at that moment, we were being surprised by how quickly the market was recovering,” he said, adding that this is not likely to happen this year.
“At the current pace, it looks like by the end of February we’ll have the most home price reductions of any February in many recent years,” Simonsen said.
The homes that are on the market now with no offer should hopefully receive one in February and sell by March, he added.
Will Home Prices Come Down in 2025?
“Not all of the home price measures are negative,” Simonsen said, adding that, according to Altos data, the median price of the newly pending sales is currently $384,700—up 2 percent from this time last year.
“But the risk is to the downside. There’s no upward price momentum in the data,” he added.
Other signs that the market might become more affordable in the coming months, besides widespread price cuts, include an increase in the number of new listings unsold.
There were 51,000 new listings this week, according to Simonsen, up 4 percent from last year; the number of new listings unsold was up 13 percent from this time in 2024.
As inventory is growing, so is the number of unsold homes sitting idle on the market: there are 637,000 single-family homes unsold on the market right now, as per Altos data.
“Most years, inventory bottoms in February and climbs for the spring,” Simonsen said. “This year, we may have already passed the bottom. Demand is obviously weaker with 7 percent mortgage rates.”
Likely because of stubbornly high mortgage rates and still-elevated home prices, “home sales in January are underperforming 2024,” Simonsen said. In January this year, so far, there are 52,000 newly pending contracts, down from 56,000 last year. A total of 266,000 homes were in contract, down from 276,000 a year ago.
The median price for single-family homes currently on the market, at $421,000, is also lower than in January 2024.
“The data is telling that home sellers and listing agents know exactly what the demand is for homes, and they understand the affordability crunch that buyers face; therefore, they’re pricing listings a little lower than last year this time,” Simonsen said.
‘One Bright Spot’ for 2025
There’s “one bright spot” in the data, according to Simonsen: “2025 is the third year in a row of flattish home price gains,” he said.
“Over the past few years, and hopefully over the next few, incomes are climbing faster than home prices. When income climbs faster than the price, we improve affordability,” Simonsen added. “For the market, this market is slowly improving affordability in the country.”