The 2025 housing market is expected to see a slight increase in home sales and inventory, with home prices projected to rise moderately. Despite recent fluctuations in mortgage rates and inventory levels, the overall outlook suggests stability in home prices, with a forecasted growth of 3.5% in 2025.
As we approach the end of 2024, the housing market is showing signs of both resilience and challenges. Recent data indicates a 9% increase in newly pending home sales compared to the same week last year, yet overall home sales are beginning to decline as we enter the seasonal slowdown. This blog post delves into the current state of the housing market and offers insights into what we can expect in 2025.
Despite the uptick in pending home sales, the housing market is experiencing a seasonal downturn. Mortgage rates continue to rise, impacting buyer activity. The question remains whether the slight market momentum observed a couple of months ago will sustain into the new year or if we are hitting the brakes once again.
As of mid-November 2024, there are approximately 722,000 unsold single-family homes on the market in the United States. This figure represents a slight increase from the previous week and a significant 27% increase compared to the same time last year. Inventory peaked in October 2024, and while many regions are seeing a decrease in unsold homes as the season progresses, Florida markets are experiencing a different trend with inventory still building.
A ten-year view of inventory trends reveals that we have now surpassed the duration of the pandemic housing boom, and it may take several more years to fully recover to the unsold inventory levels typical of the last decade. The rapid increase in inventory over the past three years was largely due to two years of ultra-low mortgage rates, which depleted unsold inventory.
According to the recently published HousingWire 2025 Market Forecast, we anticipate a growth of about 177% in the number of homes on the market by the end of 2025. This growth will bring us closer to historical unsold inventory levels, although we do not expect another 30% increase like we saw this year. The Midwest and Northeast markets will need to contribute to this inventory growth, as current data shows that there are not enough sellers to meet the anticipated demand.
This week, there were 52,000 new listings for single-family homes, marking a 6% increase from the previous week and nearly 7% from a year ago. However, when factoring in new listings that are already under contract, the overall increase in sellers is only about 3% compared to last year. For inventory to grow as projected in 2025, we need to see a consistent increase in the number of sellers each week.
In terms of home sales, we recorded 53,000 new contracts pending for single-family homes this week, alongside 11,000 condo sales. This represents a 3% increase from the previous week. However, the average number of newly pending single-family home sales has decreased to 56,000 per week, which is still nearly 10% higher than the same period last year.
The median price of newly pending home sales remains stable at $380,000, unchanged from last week. This price point is approximately 4% higher than last year, indicating that while sales are declining seasonally, prices are holding steady. The overall median price of homes on the market is currently $430,000, reflecting a slight decrease of 1.1% from the previous week but a marginal increase of 0.5% from a year ago.
Interestingly, the percentage of homes on the market that have undergone price reductions has peaked at 38.8%. Currently, sellers are reducing their list prices by an average of just over $15,000, which corresponds to a 3.5% cut from the median home price. This trend suggests a level of price stability as we move into 2025, despite the fluctuations in demand and inventory.
Historically, home prices tend to increase by about 5% annually due to economic growth and population increases. However, for 2025, we forecast a more modest growth rate of 3.5% in home prices.
As we look ahead to 2025, the housing market is poised for slight growth in both sales and inventory, with home prices expected to rise moderately. While challenges such as rising mortgage rates and fluctuating inventory levels persist, the overall outlook suggests a stable market. For those navigating the housing landscape, understanding these trends will be crucial in making informed decisions in the coming year.
