In the West, Midwest, and Northeast, pending sales hobbled along near record-lows. Housing demand got shot in January. Prices are just way too high.
By Wolf Richter for WOLF STREET.
Here we go again, with another record low in demand: Pending home sales – a forward-looking indicator of “closed sales” of existing homes to be reported over the next couple of months – dropped by another 4.6% in January from December, seasonally adjusted, and carved out a new all-time low in the data going back to 2010, according to the National Association of Realtors today. Compared to the January in prior years:
- Jan. 2024: -5.2%
- Jan. 2023: -13.4%
- Jan. 2022: -35.5%%
- Jan. 2021: -41.7%
- Jan. 2020: -35.1%
- Jan. 2019: -31.4%.
The dive to a new record low was driven by the South, the largest housing market in the US in terms of transactions, where pending sales plunged to a new record low, and where inventories are now ballooning (historic data via YCharts):
The Buyers’ Strike continues because prices are too high – “elevated,” as the NAR called them today, while blaming them and mortgage rates for this situation – after shooting up by 50% or more within a few years.
Pending sales have been hobbling along the bottom for over two years, and each sign of green shoots, that then got hyped endlessly, was trampled by the buyers’ strike. Prices are simply way too high, and they have frozen demand in the resale market.
Pending sales are based on contract signings and track deals that haven’t closed yet and could still fall apart or get canceled, for all kinds of reasons, such as buyers being unable to afford or even get homeowner’s insurance, a big issue in states where homeowner’s insurance premiums have spiked in recent years. Signed contracts that then fall apart are included in the pending sales here, but are not included in the figures of closed sales reported later.
In the South, pending sales plunged 9.2% month-to-month in February, seasonally adjusted, and were down 8.8% from a year ago, the biggest drops of the four regions.
Compared to highflying 2021, sales collapsed by 45%. Compared to 2019, pending sales plunged by 33%.
And it’s precisely in the South where inventories for sale of new houses and existing homes are now piling up the most (a map of the four Census Regions is posted in the comments below).
Inventories balloon in Florida and Texas.
In terms of transactions, Florida is the largest housing market in the US. Florida and Texas are by far the largest states in the South. So we’ll look at active listings of existing homes in those two states as an indicator of the South.
In Florida, active listings jumped by 34% year-over-year in February, to 168,717 listings, the highest in the data going back to 2016, released today by Realtor.com.
In Texas, active listings jumped by 25% year-over-year in February, to 105,867 listings, the highest for any February in the data going back to 2016 (data via Realtor.com today).
Because listings in Texas are strongly seasonal – lows in January/February, highs in July/August – we look at the stacked chart. The big red squares are January and February 2025.
Pending sales in the West fell by 1.2% month-to-month in February, and by 4.5% year-over-year, continuing to hobble along near the record low of October 2023. Compared to February 2021, pending sales collapsed by 45%. Compared to 2019, they plunged by 34% (historic data via YCharts).
Pending sales in the Northeast ticked up 0.3% month-to-month in February, seasonally adjusted, the only region of the four regions to have experienced this tiny gain. Year-over-year, pending sales were down 0.5%. Compared to February 2021, sales plunged by 37%, and compared to 2019 by 32%. Wobbling along record low levels.
Pending sales in the Midwest fell by 2.0% month-to-month in February, seasonally adjusted, and by 2.7% year-over-year. Compared to February 2021, sales plunged by 34%, and compared to 2019 by 28%. Not a record low, but wobbling along record low levels for over two years.
The plunge in demand in February, as depicted by pending sales, is similar across all four regions, as the above charts show, but it’s worst in the South at the moment, and that’s where also the inventory pileup has started in a serious way.
And inventories of new single-family houses across the nation have ballooned to the highest level since 2007, driven by the South, according to Census Bureau data. Those new houses are now adding to the housing supply, to the surging inventories of existing homes, while homebuilders are piling on mortgage-rate buydowns, price cuts, and incentives to move this inventory:
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The four Census Regions of the US:
Time to sell.
Time to sell was 2022. Everybody selling now but low demand in buyers
Harry,
It was a bloodbath in Nvidia today. Covered part of my shorts (via NVD, and SOXS). Then I looked, and Nvidia is still valued at $3 Trillion imaginary dollars.
I live in FL and what I’m seeing agrees with this completely. Houses that aren’t dropping price aren’t moving. Ones that drop price a decent amount from the peak still can move. But more and more inventory is appearing.
On a side note, I like how the “South” in the map starts at the New Jersey border.
In Michigan we say it starts at Toledo
i was looking at some florida zillow pages, and it looks like new builds and in fancy country clubs are still selling for 2022 peak prices. must be stupid money that doesn’t care about cost.
the rest though aren’t selling.
“It can’t be good, Mama, it can’t be good!”
The American dream of owning a house is becoming the American nightmare for many homeowners, with skyrocketing insurance, property taxes, maintenance, and HOA (for some). I think I will just rent for a while.
Just back to the old days when you and a couple of relatives or friends simply built the home yourself after you bought a piece of land. Depending on DR horton, Lennar, Pulte homes etc and needing a mortgage is NOT the way going forward. The ‘Mortgage’ was a banking invention for homeownership, previously people just built things and owned ’em free & clear. No friends or relatives? You can always pay the non-English speaking amigo builders around your area in T-bills for their labor. They love those LOL
Rent until they start giving houses away, like in Japan (or villas in Spain or Italy for a Euro). I’ve seen it on TV.
thurd2,
HOA issues are on the agenda in Minnesota’s House and Senate. With broad bipartisan support, their aim is to reign in the power that HOAs wield. As I follow the events, this number surprised me: 82% of all new homes in Minnesota require HOA membership; with the monthly fees and the relinquishing of sovereignty when one owns a home under a HOA.
This is the opening part of a long proposal made Monday, 24 February (House File 1268):
“A bill for an act relating to common interest communities; prohibiting certain practices relating to property management companies; modifying rights and duties of common interest communities; modifying rights of a unit owner; modifying termination threshold; establishing a meet and confer process; modifying notice of meetings; prohibiting certain governing bodies from requiring or incentivizing creation of homeowners associations; amending Minnesota Statutes 2024, sections 394.25.”
There’s a detailed list of changes that the Legislature has for the bill, and it will probably pass in two months, before the Legislature adjourns, and get signed into law by the governor.
I reckon that the pendulum of power has swung too far in favor of homeowner associations. Power and control needs to move back towards, “A man’s home is his castle.”
YMMV
Wolf – you put out some good information. My interpretation of your data is that a potential Level 5 hurricane is soon to come in the housing market. What other conclusion can one come to?
As far as a ‘plunge in demand’ in the housing market, I always smirk a bit at that concept. There is an absolute demand for housing. Everyone needs housing. It’s just that people are not WILLING to buy are current insane prices.
So yeah, more like a buyer’s strike. Deferred demand.
We’re not talking about homeless people buying homes. We’re talking about people who already live in a home buying another home. If they don’t want to buy another home, demand collapses. That’s what “demand” means.
It also includes people like me who currently rents and would love to buy a home but refuse to pay these insane prices. I guess I will never own a home again.
In Tampa we’re getting thumped by flood insurance which in my area is running ~8k a year same as home owners which is another 8k, with Usaa, plus taxes which is ~3 k on a 400k house that we homestead for lowest rate. Good thing we own it, but for potential buyers; something’s gotta give with mortgage rates as they are. Oh, and we flooded recently.
So if home prices get cut in half here, how do the mbs that got off loaded to wallstreet by the banks get paid off, a dollar on a dollar. To me it’s a very big systemic problem in the very near future. As we all know, the banks sold those mortgages to wallstreet in order to turn into bonds called mortgage backed securities. No green shoots here. Mostly brown shoots.
Did you miss the biggest change since the Financial Crisis??
Most MBS are guaranteed by the government, and the taxpayer will take care of them, thank you, us all. MBS holders, including banks, will be fine though.
Have to put in my obligatory remark…”Not in SoCal!” ‘Definitely not in OC” SoCal exceptiionalism is a thing and everyone and their mom is convinced we are exempt from any gravitational down pull…
I live in SOCAL and noticed homes aren’t selling.
Also, the prices may still seem the same when compared to 2022 but the homes are completely different. My neighborhood in San Diego had homes that needed to be gutted and remodeled sell for $1.6M in 2022. Homes on the same street are posted for $1.6M but are completely flipped and redone. They’re not selling and it is important to keep in mind that the home in 2022 solid for $300K over asking and had 20 plus bids. Not homes can’t even get an offer after 6 weeks on the marker.
CNBC: Pending home sales drop to the lowest level on record in January
High mortgage rates and elevated home prices combined to crush home sales in January.
Pending sales, which are based on signed contracts for existing homes, dropped 4.6% from December to the lowest level since the National Association of Realtors began tracking this metric in 2001. Sales were down 5.2% from January 2024. These sales are an indicator of future closings.
“It is unclear if the coldest January in 25 years contributed to fewer buyers in the market, and if so, expect greater sales activity in upcoming months,” said Lawrence Yun, NAR’s chief economist. “However, it’s evident that elevated home prices and higher mortgage rates strained affordability.”
While weather may have been a factor, sales rose month to month in the Northeast and fell in the West, which would have seen the smallest impact of cold temperatures. Sales fell hardest in the South, which has been the most active region for home sales in recent years.
Mortgage rates were also higher in January. The average rate on the popular 30-year fixed loan spent the first half of December below 7% but then began rising. It was solidly above 7% for all of January, according to Mortgage News Daily.
Home prices have been easing over the last few months in certain areas, with more sellers cutting prices, but nationally they are still higher than they were a year ago.
You gotta love Good old Lawrence, spin doctor to the rescue everytime..
“It is unclear if the coldest January in 25 years contributed to fewer buyers in the market, and if so, expect greater sales activity in upcoming months,” said Lawrence Yun, NAR’s chief economist
We just finished an appraisal of a new townhouse in a very good section of NW Washington D.C. It’s on the site of the old Walter Reed medical Center, which was moved a few years ago. The builder gave a $30,000 concession on the 1 million sales price. It’s a well built property, and brand new with all the latest amenities. So, if they had to give $30,000 back to unload it, then I’d hate to imagine what the used homes in that price range will have to do to unload them.
Manchester NH Zillow Home Price Index still up between 6.4-7% increase. Real estate ALWAYS goes up, right? Right?
Right. Until it goes down.
here is one of many examples of “Real estate ALWAYS goes up, right? Right?,” even in major and expensive cities:
can’t wait for the housing market to crash. The assessed value of my properties is insanely high. can’t afford the property tax anymore.
Many will have you believe it will not crash ever, remember this time is different as they say… Just like Bitcoin now, maybe this is the perfect buy the dip moment before price and demand back to the moon again…
Those States where they deport the most should see a corresponding drop in housing costs. Simple supply and demand.
This assumes that the people that they deport are the same people that are competing for home purchases.
Unless you’re talking about H1B visa holders, and I’m thinking this probably isn’t the case…
Not sure what can move this. Economy is humming and supposedly 50% of the consumer spending is done by households making over 250K a year. Not sure how tariffs kicking in affect all of this but assuming minimal. More wait and see until something happens that forces mortgage rates down but that generally means other bad stuff happening.
In Florida inventory is up huge BUT prices still haven’t budged. They remain at extremely high levels while inventory keeps building, and building, and building…
Perhaps if this giant pile inventory remains unsold at the end of the upcoming Spring selling season sellers will finally get a clue and we’ll start to see some significant downward price movement. Not sure where the point is when sellers cry uncle but I think there is reasonable chance that 2025 is the year it finally happens.
No one got the memo in 11570.