Jan 31 2025 3 mins 1
The US housing industry has seen significant developments in the past 48 hours, reflecting broader trends that have been unfolding over the past few months. According to the latest data from Realtor.com, the number of homes actively for sale in January 2025 increased by 24.6% compared to the same period last year, marking the 15th consecutive month of annual inventory growth[1]. This growth is partly due to sellers returning to the market, with newly listed homes up 10.8% over last year and 37.5% compared to the previous month, the largest December to January increase since 2020.
Despite the increase in inventory, home prices remain a challenge for affordability. The median list price of homes for sale in January was $400,500, down 2.2% from last year, but this decrease is largely due to more small homes being listed, which skews the median price downward. However, the median list price per square foot, which controls for size, grew by 1.2%, indicating that home values continue to increase[1].
Mortgage rates have also been a significant factor, with the average 30-year mortgage rate rising to 7.08% as of early January 2025, up from 6.2% in September 2024[4]. This has led to concerns about affordability, with the typical mortgage payment for homebuyers starting the year at the highest level ever, at $2,290[2].
Experts predict that 2025 will be a challenging year for the housing market, with elevated mortgage rates and rising home prices continuing to deter potential buyers. However, there are signs of improvement, with home sales momentum building and inventory levels slowly increasing[4].
In terms of consumer behavior, there is a shift towards buyers becoming accustomed to higher mortgage rates, with more buyers entering the market as the economy continues to add jobs and housing inventory grows[4]. However, the "lock-in" effect, where existing homeowners are reluctant to sell due to favorable mortgage rates, remains a factor, though its strength is gradually waning[1].
Industry leaders are responding to these challenges by focusing on new construction to increase inventory, as existing-home inventory is not expected to grow significantly due to high mortgage rates[4]. The National Association of Home Builders (NAHB) reports that future sales expectations are up to a nearly three-year high, despite concerns about high interest rates and construction costs[4].
Overall, the current state of the US housing industry is characterized by increasing inventory, challenging affordability due to high mortgage rates and home prices, and a gradual shift in consumer behavior towards accepting higher mortgage rates. Industry leaders are adapting by focusing on new construction and anticipating future regulatory relief.
Despite the increase in inventory, home prices remain a challenge for affordability. The median list price of homes for sale in January was $400,500, down 2.2% from last year, but this decrease is largely due to more small homes being listed, which skews the median price downward. However, the median list price per square foot, which controls for size, grew by 1.2%, indicating that home values continue to increase[1].
Mortgage rates have also been a significant factor, with the average 30-year mortgage rate rising to 7.08% as of early January 2025, up from 6.2% in September 2024[4]. This has led to concerns about affordability, with the typical mortgage payment for homebuyers starting the year at the highest level ever, at $2,290[2].
Experts predict that 2025 will be a challenging year for the housing market, with elevated mortgage rates and rising home prices continuing to deter potential buyers. However, there are signs of improvement, with home sales momentum building and inventory levels slowly increasing[4].
In terms of consumer behavior, there is a shift towards buyers becoming accustomed to higher mortgage rates, with more buyers entering the market as the economy continues to add jobs and housing inventory grows[4]. However, the "lock-in" effect, where existing homeowners are reluctant to sell due to favorable mortgage rates, remains a factor, though its strength is gradually waning[1].
Industry leaders are responding to these challenges by focusing on new construction to increase inventory, as existing-home inventory is not expected to grow significantly due to high mortgage rates[4]. The National Association of Home Builders (NAHB) reports that future sales expectations are up to a nearly three-year high, despite concerns about high interest rates and construction costs[4].
Overall, the current state of the US housing industry is characterized by increasing inventory, challenging affordability due to high mortgage rates and home prices, and a gradual shift in consumer behavior towards accepting higher mortgage rates. Industry leaders are adapting by focusing on new construction and anticipating future regulatory relief.
