The U.S. housing market is showing some interesting contradictions in early 2025. According to Redfin, buyers now have the most home selection since 2020, potentially giving them more options to find the right home. However, this potential is offset by ever-increasing home prices, which make monthly mortgage payments much more difficult, scaring off many potential buyers. Evidence of this trend is the drop in pending home sales in January 2025 to an all-time low, excluding the onset of the pandemic.
At the same time, active home listings are rising to their highest level since the onset of the pandemic, as well as an increase in new listings. Thus, the market is characterized by high supply, but is constrained by reduced demand due to financial constraints caused by rising home prices.
The supply of homes on the housing market is increasing as a result of several interrelated factors. First, the so-called 'mortgage rate lock-in effect' is weakening. Many homeowners who previously enjoyed record-low mortgage rates during the pandemic held off on selling for fear of a significant increase in the interest rate on a new loan. However, life circumstances are changing, and staying in their current home for the long term is no longer an option for many, which is releasing more properties onto the market. Second, homes are staying on the market longer. The average time a home sold in January was 56 days, the longest for a January since 2020, indicating a slowdown in the pace of sales. Finally, demand is weakening. With fewer potential buyers, the number of unsold homes is increasing. The 1.7% drop in sales in January indicates a slowdown in market activity and is helping to increase the supply of homes.
Home demand is under pressure from several factors that are making it more difficult to make purchasing decisions. First, mortgage rates have reached an eight-month high, significantly increasing monthly payments and the overall cost of a loan. For example, the average 30-year fixed mortgage rate hit 6.96% in January, the highest since May. Second, the median home price has risen significantly, reaching $418,581, up 45% from January 2020.
This combination of high prices and interest rates makes homes less affordable for many potential buyers. In addition, the number of cancelled deals is on the rise, indicating buyer uncertainty. Nearly 41,000 purchase agreements were cancelled in January, the highest number for January since 2017. Economic uncertainty, including potential tariffs, federal workforce cuts, and back-to-home orders, is also holding back both buyers and sellers. As a result, the housing market is in a period of flux, with supply and demand more balanced, but still high prices due to insufficient supply.
At the same time, active home listings are rising to their highest level since the onset of the pandemic, as well as an increase in new listings. Thus, the market is characterized by high supply, but is constrained by reduced demand due to financial constraints caused by rising home prices.
The supply of homes on the housing market is increasing as a result of several interrelated factors. First, the so-called 'mortgage rate lock-in effect' is weakening. Many homeowners who previously enjoyed record-low mortgage rates during the pandemic held off on selling for fear of a significant increase in the interest rate on a new loan. However, life circumstances are changing, and staying in their current home for the long term is no longer an option for many, which is releasing more properties onto the market. Second, homes are staying on the market longer. The average time a home sold in January was 56 days, the longest for a January since 2020, indicating a slowdown in the pace of sales. Finally, demand is weakening. With fewer potential buyers, the number of unsold homes is increasing. The 1.7% drop in sales in January indicates a slowdown in market activity and is helping to increase the supply of homes.
Home demand is under pressure from several factors that are making it more difficult to make purchasing decisions. First, mortgage rates have reached an eight-month high, significantly increasing monthly payments and the overall cost of a loan. For example, the average 30-year fixed mortgage rate hit 6.96% in January, the highest since May. Second, the median home price has risen significantly, reaching $418,581, up 45% from January 2020.
This combination of high prices and interest rates makes homes less affordable for many potential buyers. In addition, the number of cancelled deals is on the rise, indicating buyer uncertainty. Nearly 41,000 purchase agreements were cancelled in January, the highest number for January since 2017. Economic uncertainty, including potential tariffs, federal workforce cuts, and back-to-home orders, is also holding back both buyers and sellers. As a result, the housing market is in a period of flux, with supply and demand more balanced, but still high prices due to insufficient supply.
January 2025 marked an interesting phase in the U.S. housing market, characterized by a convergence of supply and demand at the national level, albeit with significant regional differences. While the country as a whole saw an increase in sellers and a decrease in buyers, individual markets showed contrasting trends, according to Redfin’s senior economist.
High-priced coastal regions like San Jose and Seattle saw increases in pending sales, while cities that boomed during the pandemic, like Miami and Austin, saw double-digit declines. Winter storms also played a role, which may have temporarily slowed sales activity in some areas. At the metro level, Pittsburgh, St. Louis, and Anaheim saw the largest year-over-year home price gains, while Tampa, Austin, and San Francisco saw the largest declines.
In terms of expected sales, the largest increases were in Portland, San Jose, and Milwaukee, while the largest decreases were in Detroit, Miami, and Atlanta. New listings increased the most in Seattle, Oakland, and Sacramento, while the largest decreases were in Kansas City, Detroit, and Pittsburgh.
Finally, active listings increased the most in Oakland, Seattle, and Cincinnati, while the largest decreases were in New York City, Newark, and Chicago. All of this data highlights the heterogeneity of the U.S. housing market and points to the complex dynamics of supply, demand, and regional economic factors.
For example, in Newark, more than half (56.7%) of homes sold for more than expected, reflecting high demand or limited supply in the area. Similar trends were seen in San Jose (52.7%) and Nassau County, New York (49%). At the same time, in some areas, such as South Florida, this trend is less pronounced: in West Palm Beach, only 5.5% of homes sell above market price, in Fort Lauderdale - 5.9%, and in Miami - 7.5%. These differences can be due to a variety of factors, including economic conditions, demographic changes, and the specifics of the local real estate market.
High-priced coastal regions like San Jose and Seattle saw increases in pending sales, while cities that boomed during the pandemic, like Miami and Austin, saw double-digit declines. Winter storms also played a role, which may have temporarily slowed sales activity in some areas. At the metro level, Pittsburgh, St. Louis, and Anaheim saw the largest year-over-year home price gains, while Tampa, Austin, and San Francisco saw the largest declines.
In terms of expected sales, the largest increases were in Portland, San Jose, and Milwaukee, while the largest decreases were in Detroit, Miami, and Atlanta. New listings increased the most in Seattle, Oakland, and Sacramento, while the largest decreases were in Kansas City, Detroit, and Pittsburgh.
Finally, active listings increased the most in Oakland, Seattle, and Cincinnati, while the largest decreases were in New York City, Newark, and Chicago. All of this data highlights the heterogeneity of the U.S. housing market and points to the complex dynamics of supply, demand, and regional economic factors.
For example, in Newark, more than half (56.7%) of homes sold for more than expected, reflecting high demand or limited supply in the area. Similar trends were seen in San Jose (52.7%) and Nassau County, New York (49%). At the same time, in some areas, such as South Florida, this trend is less pronounced: in West Palm Beach, only 5.5% of homes sell above market price, in Fort Lauderdale - 5.9%, and in Miami - 7.5%. These differences can be due to a variety of factors, including economic conditions, demographic changes, and the specifics of the local real estate market.
