Real Estate Rundown January 2025

Photo Courtesy of Clay Banks via Unsplash

Things are Looking Up for the 2025 Home Buyer

Economists at the National Association of REALTORS®’ Real Estate Forecast Summit predict a rebound in the housing market in 2025, driven by increased home sales, stabilizing mortgage rates near 6%, and growing inventory. Existing and new home sales are expected to rise, supported by a surge in new construction and more motivated sellers. Home prices are projected to increase modestly by 2%, reaching a median of $410,700, while affordability may improve as rates stabilize and incomes grow. The easing of the "lock-in effect," where homeowners hesitate to sell due to low mortgage rates, is expected to further boost market activity. Economists foresee a more balanced market benefiting both buyers and sellers, though first-time buyers may continue to face affordability challenges.

Houses are Sitting on the Market Unsold

In November 2024, over half (54.5%) of home listings sat on the market for at least 60 days, the highest share for the month since 2019, contributing to a 12.1% year-over-year rise in active listings. Many unsold homes are considered overpriced or undesirable, with homes priced well and in good condition selling quickly. Florida and Texas, which lead in home construction, have the highest shares of stale inventory, driven by high costs and natural disaster concerns. Conversely, cities like Providence, RI, and Milwaukee, WI, have the lowest shares of stale listings, with only a few metros, such as Philadelphia and Chicago, seeing a decrease in long-standing unsold inventory.

Cold Weather Causes the Largest Slowdown for the Market in 2 Years

The residential real estate market experienced a significant seasonal slowdown in December 2024, driven by higher mortgage rates and a focus on year-end festivities. Homes lingered on the market for an average of 70 days, the slowest pace since January 2023 and the slowest December in five years. Inventory also dropped sharply, with an 8.6% decrease from November. Despite a modest decrease in median home prices to $402,502, elevated mortgage rates of 6.85% discouraged potential buyers. Sellers also showed caution, with new listings barely increasing year-over-year. However, under-contract home sales rose 7.4% compared to last year, and active listings were up 22% from December 2023, though still below pre-pandemic levels. Economists forecast slightly lower mortgage rates in 2025, which may ease the market slowdown and spur a 1.5% increase in home sales. Regional trends showed the South leading inventory growth, while buyers in winter months might benefit from less competition and seller flexibility.

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