The housing market is experiencing a promising shift as active housing inventory is on the rise, approaching figures not seen since 2019. This increase is significant considering the market’s struggle with an overwhelming number of buyers and insufficient home availability during the post-COVID recovery period. Predictions suggest mortgage rates could drop to 6% by 2025, injecting optimism back to the sector.
Data shows active housing inventory stood at around 650,992 homes as of late December 2023—a stark improvement from prior year record lows where listings fell to approximately 240,000 homes. The peak of active listings for 2024 reached over 739,000, signifying a healthier housing environment compared to the drastic shortages of prior years.
Interestingly, new listings for the current year averaged over 75,000 weekly, reflecting upward trends conducive to market stability, even though they fell short of initial expectations. Prices have also remained relatively steady, with the percentage of price cuts only slightly rising to 36.4%. Overall, as we inch closer to 2025, the housing market is gradually returning to balance.
While the increased inventory hints at buyer choice, there's still apprehension among prospective homeowners. A recent report highlighted, “Despite strained affordability, this year marked the 13th-consecutive calendar year of rising national home prices,” reflecting the complex dynamics at play.
Housing analyst Nick Gerli predicts regional disparities will continue to shape the market. He pointed out issues presently plaguing certain states, such as Florida, which faces three primary challenges entering 2025—a structural slowdown in migration, excess supply from home builders, and affordability crises driven by high HOA and insurance costs.
These combined forces push more inventory to the market, leading to reduced demand. Gerli warns certain Florida markets may see home values drop by as much as 10% next year, with cities such as Tampa and St. Petersburg particularly vulnerable.
Shifting the focus to Texas, where previously booming markets like Austin are now witnessing falling prices, Gerli explains, “From 2020 to 2022, home values spiked so much...resulting in a slowdown of home sales.” With too many new homes coming onto the market, there’s anticipation for price corrections. Gerli elaborates, “Austin will be the first market to bottom,” underscoring the ups and downs of housing values.
Conversely, the Midwest and Northeast regions are maintaining stability relative to their pre-pandemic inventory levels, largely due to continued affordability. Metro areas like Buffalo and Milwaukee are experiencing price growth, fueled by fairly low listings and reasonable home prices.
Looking nationally, numerous builders are feeling the heat with high levels of unsold inventory—at the highest since 2009—indicating they might have to discount prices to sustain sales momentum. Gerli notes aggressive pricing strategies being observed: “I just toured a builder site…where the builder offered me a 4.7% mortgage rate for a 30-year term.”
Overall, Gerli emphasizes, “On a national level, we expect home prices to remain flat in 2025,” adding complexity to the recovery outlook. He touches on the increased rate of early-stage mortgage delinquencies expected to present challenges as pandemic-era protections fade.
With predictions of moderate spikes in existing-home sales and improving affordability thanks to rising wages, the stage is set for significant shifts. Buyers, sellers, and investors should be vigilant, tracking these developments keener as we approach 2025.