2025 US Housing Market Forecast: Will Rising Inventory and Prices Define Stability?

Over the last two and a half years, the housing market has been navigating the aftermath of the pandemic-induced boom and recession. As we move into 2025, the pressing question remains: will the market return to stability, or are more challenges ahead? Recent data highlights trends that hint at gradual growth and stabilization.

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Inventory Levels on the Rise

As of December 2024, there are 690,000 single-family homes available for sale across the U.S., marking a 26% increase compared to the same time last year. This figure is now just 17% below the inventory levels seen in December 2019, a reference point for pre-pandemic norms. The increase in available homes primarily stems from a decline in buyer demand rather than a significant rise in new sellers. However, regions like Florida and Texas are exceptions, where factors such as rising insurance costs and climate-related risks are prompting more homeowners to sell.

During the 2010s, inventory consistently declined due to historically low mortgage rates that fueled buying activity. The pandemic further exacerbated the shortage, culminating in a record low inventory in early 2022. Higher interest rates in recent years, however, have reversed this trend, slowly building up the number of unsold homes on the market.

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More New Listings Signal Healthier Supply

Weekly new listings for single-family homes have shown a steady rise, averaging 8% higher than the same period last year. Even during Thanksgiving week, typically a slower period, new listings increased by 8.7% compared to 2023. This consistent growth in listings, ranging from 5% to 10% weekly, suggests a more balanced housing market heading into 2025.

Pending Sales Gain Momentum

Pending home sales are also witnessing an uptick, with about 51,000 new sales recorded weekly over the past month. This represents a 10% increase over December 2023. The late-year momentum in sales could be attributed to buyers who held off earlier in the year, possibly waiting for the outcome of the election. While the growth is modest, it reflects an optimistic trend for 2025. However, the market lacks signals of a dramatic surge in buyer activity.

Stable Home Prices

The median price for single-family homes under contract remains solid at $384,900, reflecting a 5% year-over-year increase. This steady growth is notable, considering the softer demand earlier in 2024. Looking forward, home prices are projected to rise by a more modest 3.5% in 2025, aligning with expectations for a gradually stabilizing market.

Price Reductions Offer Insight

As of mid-December, 38.4% of homes on the market have undergone price reductions from their original listing price. This percentage has held steady for several months, indicating that demand, while subdued, has not weakened further. With the introduction of fresh inventory in early 2025, the proportion of price cuts is expected to decrease temporarily. Importantly, no data currently points to a significant price correction on the horizon.

What to Expect in 2025

While dramatic shifts are unlikely, the slight increases in inventory, pending sales, and stable pricing all suggest that the housing market is on a path toward recovery. The post-pandemic adjustments have fostered a more balanced environment, and modest growth is anticipated in the coming year. Buyers and sellers alike can look forward to a more predictable and stable housing market as 2025 unfolds.

Also Read: Housing Market Expected to Improve Next Year, Though Challenges Persist