The U.S. housing market is experiencing significant slowdowns, with home sales at their weakest pace since the pandemic began, according to recent data from Redfin. High housing prices and mortgage rates are largely contributing to this trend, as properties are now taking longer to sell and fewer residences are exchanging hands.
Jordan Hammond, a Redfin Premier agent based in Raleigh, NC, noted, "Prospective buyers have been cautious because they’ve seen homes sitting on the market and they’ve heard interest rates and prices may drop. When the market isn’t competitive, some buyers think they should wait for costs to go down." This mindset appears to be shifting, as Hammond also stated, "People are starting to believe if they want or need to move, and they can afford to, they should do it. "
Key findings from the four weeks leading up to January 26 reveal additional insights. Before sellers accepted offers, the average U.S. home listing spent 54 days on the market, the longest period since March 2020—and one week longer than the same time last year when properties were selling comparatively faster.
Looking at inventory, the housing market recorded 5.2 months of supply, which is higher than the 4.9 months recorded last year and marks the highest level since February 2019. A longer period of time at this measurement suggests homes are sitting unsold longer, signifying a potential buyer’s market. This month supply metric indicates how long it would take for current homes to be sold at the current pace.
The report also highlighted the largest year-over-year drop of pending home sales since September 2023, which experienced a decline of 9.4%. The high cost of purchasing homes—driven by mortgage rates hovering around 7% and annual housing price increases of 4.8%—is having a detrimental impact on sales. Currently, the median house payment is at $2,753 per month, slightly below the record high set back in April.
Extreme weather conditions have also played their part, with wildfires affecting areas like Southern California and inclement winter weather gripping the Midwest, the South, and the Northeast, which are keeping potential buyers at home. Despite these challenges, Redfin brokers foresee prospects for some rejuvenation of the market as new listings increase and mortgage rates decline from their peak earlier this January.
These shifts could lead to renewed buyer activity, as individuals may become fatigued from waiting for prices and mortgage rates to drop any lower. The national scope of the housing market indicates areas of both strengthening and weakening based on local dynamics.
Consider the metro areas with the most notable changes. Pittsburgh, for example, saw the highest year-over-year increase in median sale price at 19.3%, followed by Milwaukee with 16.7%. Conversely, cities like San Francisco and Austin have recorded declines at -5.6% and -2.6%, respectively.
Examining the sales data also reveals trends on new listings. San Jose, CA, leads with over 23.4% increase contrasted by stark declines seen across other metro areas; San Antonio shrank by 17.4%. Out of the major metros analyzed, pending sales have only risen slightly, most noticeably within Portland, OR (9.7%) and Milwaukee (2.6%), highlighting the uneven marketplace across different locations and demographics.
On the rental side, shifting dynamics suggest good news for renters. The median asking rent price across the U.S. showed signs of decline, down to $1,695 as of December—a 0.5% decrease from November and marking the lowest point seen since peak rental prices back in July 2022. According to the report from Realtor.com, the increase of new apartment constructions initiated during the pandemic’s boom years plays a significant role.
Daryl Fairweather, chief economist at Redfin, emphasizes this point, stating, "There are still units coming online now from projects initiated back in 2021 and 2022." This surge of new apartments has allowed renters to negotiate terms more favorably, leading several experts to name this trend as indicative of a renter's market. Fairweather adds, "We think that's going to continue for the next year."
For renters, it's particularly important to stay informed on local market conditions, as these developments may vary significantly between regions. For example, Austin, Texas, saw significant levels of construction, resulting in its median rent price now at $1,394, which has dropped considerably down from its August high of $1,482.
Overall, this marketplace presents smaller opportunities for renters to negotiate their leasing terms. Berner, senior economist at Realtor.com, offers insights for tenants, advocating for strategies such as comparing similar rental prices within neighborhoods to bolster negotiations effectively. "If your property manager is trying to raise your rent, you can come to them with information to show them your rent shouldn't be increased," he suggests.
Rental properties can entail additional costs, and landlords often weigh tenant retention against turnover costs. By finding common ground through negotiations of rent, amenity fees, or shared living arrangements, renters can find beneficial solutions suited to the current environment.
While the housing market faces uncertainties and slowdowns on one side, the equilibrium shifting toward rentals presents unique opportunities for those seeking housing solutions younger generations shouldn't overlook as the future remains unclear.