The housing market experienced a notable shift in January 2025, with home sales declining sharply amid rising prices and increased inventory. According to the latest data, 1.18 million homes were available for sale at the end of January, marking a 3.5% increase from December and a significant 17% rise compared to January 2024. Despite this increase in available homes, sales of previously-owned homes fell by 4.9% from the previous month, surpassing analysts' expectations of a 2.6% decline.
The median home price reached $396,900, a record high for January and an increase of 4.8% from the prior year. This surge in prices has contributed to a slowdown in sales, which are still running at a 15-year low despite being 2% higher than in January 2024. Homes spent an average of 41 days on the market last month, the longest duration since January 2020, before the onset of the COVID-19 pandemic.
In terms of sales characteristics, all-cash offers accounted for 29% of transactions, reflecting a historically high rate, although slightly down from 32% the previous year. The share of homes sold above list price remained relatively stable at 15%, compared to 16% in both the previous month and year-earlier period. First-time buyers constituted 28% of sales, highlighting continued interest in homeownership despite market challenges.
Analysts note that the current inventory represents a 3.5-month supply at the existing sales pace, well below the six-month supply considered balanced between buyers and sellers. All four regions tracked by the National Association of Realtors (NAR) reported price gains, further indicating the persistent upward pressure on home prices.
"More housing supply allows strongly qualified buyers to enter the market," said Lawrence Yun, Chief Economist at NAR.
The prolonged duration homes remain on the market and the necessity for both increased inventory and lower mortgage rates are seen as critical factors for stimulating market activity.
"But for many consumers, both increased inventory and lower mortgage rates are necessary for them to purchase a different home or become first-time homeowners," Yun added.
"Realtors are putting more signs up, but the buyers are not coming," Yun remarked, highlighting the current imbalance between supply and demand.