Will rates allow for ‘peak’ homebuying season?

Over the last two months with economic uncertainty, the bond market has responded and the yield for the 10-year treasury has declined by 60 basis points from 4.8% to 4.2%. The 30-year fixed mortgage has followed suit, recently falling as low as 6.75%, the lowest level since mid-December.

It’s quite obvious that stubbornly high mortgage rates slowed down early season homebuyers in the first quarter of 2025. Our weekly pending home sales data continues to run about 3% below last year.

This is after Q4 2024 was 5% above the year prior. That’s a pretty notable swing.

So, mortgage rates have been declining for several weeks now. In fact, mortgage rates are cheaper than they were at the same point a year ago. Now, as always with swings in the cost of money, we watch for signals of homebuyers taking advantage of opportunity. If we’re lucky and mortgage rates keep falling, the question is if we’ll be able to measure any turnaround with homebuyer demand soon.

Unfortunately, I think we’re a ways off still from a meaningful shift in housing demand trends. Last year as rates eased down from 7.5% to 6.5%, I expected some improvement in demand. But we didn’t really see any change in the buyer demand metrics until rates got closer to 6%. Last week at HousingWire’s Housing Economic Summit in Dallas, I shared the data on why I expect that the same 6% threshold will be what we’re facing in 2025.

The added wrinkle this year is that lower rates are being driven by weaker assessments of the economy and jobs. By some measures, the U.S. economy is slowing dramatically right now. Look at the Atlanta Fed’s GDPNow data, for example. A slower economy probably leads to cheaper mortgage rates, but it also means fewer people are employed and incomes stop growing.

In the last three years, everyone has been employed in this country. We’ve had super high employment. So when mortgage rates move cheaper, potential homebuyers are fairly optimistic about their personal situations and they jump to take advantage. This is what happened last September. But now if mortgage rates move lower because unemployment spikes, and the economy shrinks, then it remains to be seen how much a 50-basis point decline in mortgage rates motivates people in a more pessimistic macro economy. People have to balance the cost of money with things like job security when they’re buying houses.

The thing to keep in mind for the housing market as we roll into March is that mortgage rates have been easing down. The real time home sales data that we track does not yet show any response, however.

In fact, as of the end of February, the sales and home price data continue to look very weak, even compared to the lows of 2024.

Let’s look at this week’s data and see what we can see. I’m Mike Simonsen, founder of Altos Research here at HousingWire. Let’s start with the active inventory of homes for sale right now.

Inventory

Total available inventory dipped this week to 639,000 single-family homes on the market. That’s fractionally fewer than a week ago. There are 28% more homes on the market now than a year ago.

The purple line in this chart is 2025, you can see that nationally there are plenty more homes unsold on the market than 2024. During the second quarter last year, inventory rose quickly because mortgage rates rose quickly and peaked in May. This year, if we’re lucky, mortgage rates will continue to ease down, so while there are 28% more homes on the market now than a year ago, by the end of May that spread could be down to around 22%. Inventory grew faster last year.

We usually focus on the single-family data in these videos, but it’s worth pointing out that the unsold inventory of condos and townhomes is 33% more than last year at this time. There are 193,000 on the market. Condo inventory has been growing slightly faster than single-family houses. While single-family listings are still 22% fewer than February of 2019, the unsold inventory of condos is roughly back to the old normal levels. In February 2019 there were 194,000 on the market.

In fact, you have to go back to 2016 before you can find a year with consistently more unsold condos than we have now around the U.S. Also, while the available supply of single-family homes shrank a little this week, the inventory of condos grew by about 1%.

What’s fascinating is that 36% of all the condos and townhomes for sale in the U.S. are in Florida, and there are a lot of Florida condos on the market. Of the 194,000 condos on the market in the US, 70,000 of those are in Florida.

In most of the country, condos are a pretty small percent of the market. Single-family homes dominate the market, but it’s worth checking in on the condo market occasionally.

New listings

New listings also dipped for the second week in a row. There’s probably some weather effects in there, and I expect to see a jump in the new listings volume in next week’s data.

There were just over 53,000 new listings unsold, plus another 10,000 new listings immediate sales. That comes to 2% more unsold new listings and actually 5% fewer sellers overall than in 2024. That’s three out of the last four weeks with fewer sellers now than in 2024.

In this chart we’re looking at the unsold new listings. I like this view because even though there are fewer sellers overall, more of the listings are actually adding to active inventory. You can see the purple line is tracking just above the blue line from last year. Each week there’s a few percent more homes than we saw a year ago.

The most important takeaway from the weekly new listings data is what it’s not doing. There are simply not a lot of homesellers across the country. Even in the slowest markets in the country, like Florida, for example, while there are plenty of unsold homes on the market, there’s not a rush of sellers adding to that. That fact keeps a lid on inventory growth across the country.

Pending home sales

As we roll into spring, weekly home sales should start climbing. This week saw the most newly pending sales all year but sales are still trailing 2024. There were just over 60,000 newly pending sales for single-family homes this week, which is up almost 7% for the week but is still 3% fewer than the same week a year ago.

Sales should climb each week now through the Easter holiday week. Easter is late this year, so that’s something to note of for March as we watch the numbers roll in.

In the chart here we’re tracking the real time counts of the newly pending home sales each week. The purple line continues to show just no growth in sales activity compared to 2024. As you can see, we should expect weekly rapid growth in home sales for March as the spring season warms up.

There are 324,000 single-family homes in contract to sell right now. That’s 3.75% more than last week and is running 3% fewer than last year at this time. A lot of sales close right at the end of the month, so next week will probably dip in total pending sales even as the weekly numbers increase.

The takeaway from the pending sales numbers is that it takes roughly 35 days on average for sales to close, so homes in contract now will generally close in March. We know there are fewer homes in contract than last year at the end of February so we have visibility that home sales for Q1 2025 will come in below Q1 of 2024.

That’s counter to our forecast for the year. Back in the fall when we published our HousingWire forecasts, we were expecting slight home sales growth for 2025. Sales could still improve slightly if mortgage rates continue to fall, but that change has to happen quickly because Q2 is the seasonal peak for home sales.

Home prices

The median price of those newly pending contracts came in at $389,900 this week. That’s a bump up of 1% for the week and is just 2.6% greater than a year ago.

You can see the purple line for 2025 is in the seasonal climb. The best homes and the most buyers are here in the spring, so prices inch higher. Given the season, I’d expect prices to step higher in the next few weeks but there are many signals of price weakness and low buyer demand. I would not be surprised if we get less seasonal lift than usual in March.

This is a national median price of all the homes in the country that got offers and went into contract this week. Nationally, prices are slightly ahead of last year. Some markets have higher home prices and plenty have lower home prices than in the spring of 2024. As I mentioned, condo inventory is climbing faster than houses, and condo prices are weaker. Nationally, condo prices are unchanged from last year. In Florida, the median price for condos is actually 4% below last year.

This is imporant because local markets can behave very differently from one another. There are many years when things are moving in concert. Right now, however, some markets have plenty strong price appreciation while others have falling home prices.

Pride reductions

The leading indicators for future sales prices continue to be weak with no signs of any turnaround in the price reductions.  The percentage of homes on the market with a price cut from the original list price is 33.7% now. That’s up 50 basis points on the week and is notably higher than last year at this time.

In the chart here, the purple line for 2025 has an obvious trend. There are more homes on the market now with price reductions than any recent February. Price cuts are increasing.’

New listings are pretty low, so there’s not a lot of fresh inventory. Fresh inventory doesn’t need a price cut for a month or more.

The withdrawn listings are pretty high too. For homes that are on the market and don’t get an offer, you can cut your price to try to stimulate demand, or you can withdraw the listing and hopefully test the market again in the future.

I was looking at a San Francisco condo this weekend. It’s listed for 15% less than it sold for in 2015, ten years ago. It’s been withdrawn and relisted with a lower price 4 times in the past year. Sometimes, sellers are trying to game the system with a withdrawal. On most MLSs, if the property has been off the market for maybe 30 days, they’ll reset the days on market and original list price. In the Altos data, we track total days on market. So while this condo officially shows as a new listing, in the Altos data we show nearly 400 days on market. At some point this property will be a buy. It’s a super cool space and it will be fascinating to see the price point.

That’s all the time we have for today’s data. If you need to communicate about this market with your buyers and sellers, you should join us at Altos Research.

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