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.
Shorting out of the money call options with two days until expiration to earn the premium was free money. There are option strikes up to $300 (!) because of the run it had last year. $240 would be a $6 Trillion market cap(!!) It has yet to have a close above $150. It will never see $200 in my opinion. I am hoping it bounces though. I am in full-out sell the rallies mode now, this looks like a down year for stocks, if it’s another up year it won’t be too much, but it could fall 10-15% easily. All those stocks that have ridiculous valuations that went vertical and plunged, they are finished, they are not going back up.
Some people beleive Nvidia is going to $10 Trillion. I kid you not.
Agree, Palantir and AppLoving and similar are done. Both got to couple hundred $Billions for a day or two. I traded Palantir on short side.
Likely market top is behind us. Either Dec 17th or Feb 19th depending on one’s favorite index.
Bloodbath? -8%??? Dude, that’s nothing unless you were a sucker late to the buying party.
Well, for one day, 8% is a BIG drop, I think that’s what he meant.
Calls on thriple-short etf(s). 60+% in couple of days. Rolled them into September SQQQ calls. Not that you would understand.
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.
Mason-“Dioxin” Line.
“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
Around here we just pay them in cash!
Oh the good days..we did just that with a solar room addition, was fun, created flow to the house and got back 5x in use plus market value when sold yrs later…
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.
I did recently see a town on the Italian island of Sandinia, offering homes for €1 (one Euro) which is currently $1.04! The economy there has cratered and the population is dwindling. They were catering to Americans who want to ‘flee due to T being elected.’ $1.04! Don’t move there expecting paradise though. Just a personal suggestion.
“Sardinia”
There are many small towns scattered across Italy with those offers. They are not deals for lots of reasons I won’t bother explaining. And they have been around for years, nothing to do with T.
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
Come to Florida. The governor is talk about abolishing property tax. It’s getting crazy ok.
I’d rather pay no prop tax than no income tax.
Sounds good.
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.
Most of the people who buy homes are not that smart generally to see if the prices are high or not
It’s not that people are not willing at these prices and rates but people are not able to afford monthly payment of owning a home
Home prices need to fall a lot I think
It’s a slow moving truck.
I think it’s a fast moving truck that most people cannot catch. However – I think that truck is gonna hit the brick wall straight ahead.
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.
$16k on $400k just for insurance? OK, now you have my attention.
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.
Oh, like in privatizing the gains and socializing the losses? Ten four.
No, not in the current setup. These mortgage companies (Fannie Mae, Freddie Mac, etc.) are under government conservatorship after having been “socialized” during the bailouts of 2008/2009. Over the past 10 years or so, they have been highly profitable. They collect fees for every mortgage they securitize. That’s how they make their money, is from these fees. Ultimately the homeowners pay those fees. And the government gets every dime of their profit. If they make losses, the government will eat those losses.
So for now, “socializing the gains, and socializing the losses.” Fair enough.
However, the Trump administration will try to privatize them, and then we’re back to “privatizing the gains and socializing the losses.”
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.
I am in SD and market is very tough here
Realtors are suffering
Buyers are sweating
Sellers are salivating
Homes are not selling
Prices need to come big time
The cost of owning home in socal has increased drastically
Back in bubble 1.0, the SD RE market was considered raging hot in 2004 and I put my house on the market in the spring after noticing inventory piling up in Rancho Santa Fe. Turned out it peaked in my area exactly when the Fed started raising rates that spring. Didnt get an offer for a couple months and took the first one and ran. Took over a decade+ for the buyer to recover.
Interesting, waiting for counterpoint from someone to post SD is still red hot, it really wasn’t that long ago so many on here saying SD is infallible and bidding wars forever and what not, who knows maybe that’s still happening at certain area in SD…now it’s the time to give your testimony.
Or maybe SD is starting to fizzle, as far as I can tell the insanity is still in OC unfortunately…maybe OC is the new SD and next to claim that infallible crown.
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.
So you’re saying there’s a chance I can get that 1900s Georgetown townhouse I’ve always wanted for….less? Nice!
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.
There are about 2 million illegals in Texas so if you deport them and another 2 million legal family members follow them, we could be seeing 4 million people hit the road. Fear and loathing has already seized the country and it’s only just started.
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…
Well there is an additional 3 million drop in demand per year due to stopping them in the first place plus those deported. Add in the current homebuilding rate and it begins to make sense shelter cost is going to drop, likely significantly many/most States. Economic Migrants are known to double/triple up families per household so they are indeed a significant factor renting and homebuying plus the Government aid they receive. For example Canada has an insane immigration policy right now, their shelter costs thru the roof and quality of life drastically reduced cost of living, access to medical care and Education. Net result current political party about to be dumped by voters. Perhaps those who advocate for open borders might consider the negative effects?
I disagree. The people being deported represent a substantial portion of our labor force and losing them will increase the shortage and drive up labor costs. That, with the increased lumber costs from proposed tariffs, will make it hard for builders to lower prices at a time when demand is at its lowest. They may have to as inventory piles up but they will take a bath and it will create another sizable gap in building like after the 2008 downturn and perpetuate the overall inventory shortage into the future.
Agreed, Tim. If deportations of this scale were logistically possible (unlikely), it’s estimated that would include “1.5 million construction workers, including more than one in three roofers, ceiling tilers, stucco masons, plasterers and drywall installers.” Not good for the housing market.
Have you seen the quality of construction these people are putting out for the likes of D.R. Horton, etc.? It is ABYSMAL. They are not qualified for what they are doing. Put a marble on the floor and it quickly rolls to the wall. There is no such thing as plumb, level or square. I’d like to see these corporate builder scum in jail for what they’re doing.
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.
Condos are budging more than houses, though houses have started to budge too:
What you could see is after the helocers get under water and no longer draw on house like a personal piggy bank is people simply walking and flipping the keys back to the banks. But this time the banks are simply servicers and not bag holders, and they’re just gonna mark properties down and resell and the supply slowly goes away after a while and prices drop significantly We hope. As prices fall that will capture more and more underwater helocers and they’ll walk too until despair sets in and the thing bottoms out.
I’d love to see my taxes drop on my rentals, but somehow that won’t happen as the county will just up the mileage rates to make up shortfalls.
A question for wolf would be just which taxes will pay off the underwater mbs holders, state, federal, or municipalitie?
“which taxes will pay off the underwater mbs holders, state, federal, or municipalitie?”
D. None of the above.
Correct answer: federal borrowing will make them whole.
Then, federal taxpayers pay interest on that new borrowing forever.
No one got the memo in 11570.
I’m so grateful, for a change, not to be in the crosshairs of the latest gold rush. Several decades of that was enough. I’m glad I didn’t freshly move into a storm corridor with an impending insurance and property tax crisis, and buy in at the top. Sometimes torpor is a blessing? Buy and hold, I know, is so out of style. But over several decades, inflation seems a pretty sure thing, and this shack has been a hedge. But expecting all that ease to come quickly would have been a pipedream. There was a financial crash, and a divorce, a pandemic, and some other things.
I feel while the prices are too damn high also the south got hit with some serious storms and devastation,almost bought a home on 60 acres in NC(priced within reason),while the town directly was OK that county got hit pretty damn hard along with other counties and states,feel will affect sales there along with other regional states for awhile.
I will just hold out renting,am open to buying just not at insanity levels.
To high? go to Home Depot and price out some windows $24-$28,000 for the windows and then you gotta get them installed. The house is not even worth the sum of its parts due to Biden‘s manufacturing delays.
And as a financial guy, you should know the largest tradable commodity is a collateralized debt obligation, a CDO, which is back by the home if we have inflation, the only thing to counteract that is the home note.
“…the largest tradable commodity is a collateralized debt obligation, a CDO, which is back by the home if we…”
You mean MBS?
CDOs are mostly used in CRE and other commercial lending, mostly with non-housing debts. And the outstanding balance of CDOs is much smaller than the MBS out there. But most MBS are guaranteed by the government, so the taxpayers are on the hook for credit risk, not investors.
Yes, Jessup, you are totally right, Biden should be ashamed of manufacturing those cheap Milgard and Pella windows so slowly. F him!
CDOs, c’mon, man. I’m guessing WR didn’t smack you down because maybe you did RTGDFA. OR he otherwise took mercy upon your soul.
Howdy. YEA HAW. NO more peaking with housing prices????? Lets hope so…. Lets hope the hissing continues without a POP……..Still a long way to go down Youngins. Stay Tuned…….
In the movie “Wall Street,” which takes place in 1985, Charlie Sheen is making big bucks with Gordon Gekko and he needs a new place to live with his new girlfriend Daryl Hannah. The real estate agent tells him she can get him a mortgage for 10%. They had been much higher, so 10% at the time seemed like a bargain. Now, since mortgage rates had been much lower for many, many years, 7 percent seems way too high. So my point is it’s all relative. Coming from a much higher cost makes it seem cheap, coming from a much lower cost makes it seem expensive. I think there are many factors besides mortgage rates which have the housing market in limbo, probably the number one reason is simply that home prices are, as Mr. Richter points out, still way too high.
—Along with just about everything else.
Hopefully someday there will also be a buyer’s strike in the stock market. “What, 10 times p/sales? No thank you”. Stock prices are hugely inflated. Also they are paying too much for the privilege of holding Bitcoin.
“Something” is starting to happen. I was taking a cursory glance at my local Raleigh metro region this week, and there is suddenly a TON (comparative to the last 3-4 years) of newer existing homes coming to market. Units that either sold for ~$400K new in 2014-2019 or ~$750K new in 2021-2023.
We’re talking about stuff that was bought brand-new in 2022-2023 for $800K at peak mania that are now being listed — they won’t sell — for $1.2M… and, it’s not just a few. I’m not sure how much of this is just aspirational pricing vs. “I need to get this amount to cover my perceived investment.” I guess we’ll see. We’ve recently had new property assessments that have skyrocketed taxes and insurance in the past year.
I think there are potentially some bag-holders starting to come out of the woodwork, or maybe just people waking up to the realities of their plight who are trying to get out before it all goes to shit.
Either way, I really hope there isn’t a single buyer out there gullible enough to fall for a $400,000 increase from 2023. The greed is just astounding. I really hope all these types of sellers just try to game too long and wind-up bankrupt.
“I really hope all these types of sellers just try to game too long and wind-up bankrupt.”
Most will. Same thing happened last time. What they don’t even realize is that they are already underwater.
if you look at the Western towns that were the biggest targets for the pandemic migration boom, you see a lot of luxury homes that were purchased in 2020 or 2021, with tons of money, dumped into “updates” since purchase. And now many are listed for sale for astronomical asking prices, and there they sit! Places like Breckenridge, Colorado, and Park City, Utah just a name a few.
Also a ton of luxury, new construction in these same destination mountain towns in the West, but none have more homes for sale over $5 MM than Park City and its surrounding towns. Over 200 for sale listings over $5 MM rn in Park City area. If you compare this with other mountain town destinations with a similar size, geographic footprint, Park city has – in some comparisons -three times the number of listings over $5 MM.
But as WR always says, real estate is hyper local.
I think that an underlying assumption of the always optimistic real estate market,particularly at the lower end, was that the open border policy off the dems would continue. The excess inventory in Jacksonville Fla. Is staggering. If the present administration is serious about the border,and reducing the 2 1/2 trillion a year stimmy,serious slowdown is on the way.