National Real Estate Insights:
Inflation ticked up; the Fed kept its benchmark rate unchanged; interest rates ticked down below 7%; and stock markets remained high (though sometimes volatile). National and international politics have been characterized by enormous and constantly changing developments, with yet uncertain effects on the economy and housing markets. And consumer confidence dropped across all age, income and wealth groups as expectations for personal finances and both short-term and long-term economic conditions all declined (per University of Michigan’s February Surveys of Consumers).
January began with the usual big rebound in new listings, a trend almost certain to accelerate in coming months. This will help fuel sales moving toward and into the spring selling season, which typically sees the most heated market conditions of the year, and, not unusually, the highest median home sales prices. Existing-home sales in January plunged from December (by 27%) – but rose 2.6% over January 2024. Note that January closed-sales data mostly reflects offers accepted in December, the heart of the mid-winter holiday slowdown: Sales statistics in the next two months will provide a better indicator of market direction in 2025.
Year over year, monthly median house and condo/co-op sales prices were up 5% and 2.9% respectively. 47% of January home sales sold in less than 1 month; 15% closed for over asking price; and median days-on-market ran high at 41 days, but should plummet as new listings begin to dominate sales.
28% of homes were purchased by first-time homebuyers; 17% went to investors or vacation-home buyers; all-cash sales made up approximately 29% of the total; and 84% of buyers bought in suburban or rural areas. Reflecting the continuing impacts of both home-price appreciation and of the increased participation of more affluent buyers in the market, homes selling for $1,000,000+ rose 27% year over year while sales under $250,000 declined.
The January 2025 median sales price - mostly reflecting listings which went under contract in December - fell month over month (the normal seasonal trend), but rose 5% over January 2024. Continued year-over-year home price increases have added substantially to the household wealth of homeowners, but is challenging for buyers, especially younger, less-affluent and first-time buyers.
Comparing the 2024 median house sales price to annual prices since 1990: Besides its many non-financial benefits, homeownership has typically been an excellent investment, especially over the longer term. Tax benefits - such as the $250k/$500k exclusion from capital gains - can add substantially to the financial returns.
Below is an illustration of the qualifying income required to buy a median-priced house with a 20% downpayment at the prevailing interest rate in selected U.S. metro areas. Very generally speaking, a "median house" has 3 bedrooms, 2 baths, and 1500 to 1800 square feet of living space.
Appreciation and market seasonality trends in the national condo/co-op market generally mirror those seen in house sales. Condo/co-op sales are most commonly seen in and around urban centers and certain vacation destinations.
The number of new listings rebounded dramatically in January from the usual December low, and can be expected to surge higher through late spring.
Closed sales mostly reflect market activity - as defined by listings going into contract - in the previous month. In most regions, December is the slowest market of the year, so closed sales typically hit their nadir in January. Fueled by the rush of new listings, sales volume will almost certainly accelerate over the next 4 to 5 months. (Areas with large 2nd-home markets can see different seasonal trends.)
The inflation rate has risen each month since September and, among other effects, has made the Fed reluctant to further reduce its benchmark interest rate. With the tariffs imposed and threatened by the current administration, opinion is divided as to possible impacts on inflation, interest rates and construction costs.
A long-term illustration of mortgage interest rates: In January 2025, rates ticked above 7%, but then ticked back down in February. Interest rates are one of the fundamental components in housing affordability calculations, along with home prices, household income and, lately, homeowner's insurance rates.
This chart compares appreciation in the national median home price to growth in median household income. Since 2012, and especially from 2020, the gap between home price (blue line) and household income (green line) has widened. In consequence, home sales have increasingly skewed toward older, wealthier buyers - a considerable change in social and market dynamics. Among other issues, older homeowners tend to move much less often than younger age segments, impacting the supply of new listings coming on market.
With many short-term ups and downs, stock markets have risen dramatically higher over the past 14 months, with substantial effect on the wealth of those invested in such assets. Such households are more likely to be willing and able to pay all-cash when home buying - and so be less concerned about interest rates.
As the number of resale (or existing) home listings has remained low by long-term norms, the number of new-construction homes for sale has reached its highest count since 2008, and their sales have increased as a % of total sales. Construction is most concentrated in states such as Texas, Florida and North Carolina.
Serious delinquency in credit card payments (overdue by 90+ days) has hit its highest rate since 2012, but due to home-price appreciation and long-term, fixed-rate loans, serious delinquency in mortgage payments - illustrated below - remains close to historic lows.
*Findings from the internal analysis were based on a hedonic regression analysis that examined Compass residential closed sell-side transactions from January 1, 2024 - December 31, 2024, nationally and for all residential property types (single family, co-op, condo, townhouse, and condop). For 2024, Compass pre-marketed listings are associated with an average 2.9% increase in the final close price versus Compass listings that went directly to the MLS. The estimated effect has a 95% confidence interval ranging from 1.9% and 3.9%. This finding may vary depending on market conditions and seasonality. The results provided are based on current data and methodologies, and should not be interpreted as definitive predictions of future outcome.
