Buyers, sellers and practitioners in the housing market pay close attention to the headlines that emerge from various changes in market activity, and sometimes those headlines can lead to fear. That fear trickles through to homebuyers and sellers, often leading them to stay on the sidelines.
But paying closer attention to the data before it gets processed into headlines can actually serve as an “antidote” to fear, and looking more closely at the trends can illuminate what is driving those trends and how things could ultimately play out.
These were just some of the suggestions shared by Mike Simonsen, founder and president of Altos Research at HousingWire’s 2025 Housing Economic Summit held in Dallas on Wednesday at the George W. Bush Presidential Center.
Data versus headlines
The majority of Simonsen’s presentation focused on tracking the most up-to-date trends in housing, which is showing that home sales so far in 2025 are coming in lower than they did last year.
Leaning on data primarily can allow people to be both “contrarian and bullish,” he said, and the slightly downward trend of sales data might cause people to lean into the fear they’re feeling either from inflationary expectations or recent government policy moves. But there is also a 28% surge in inventory compared to this time in 2024, though the inventory increases are not evenly distributed nationally.
California is leading the way with 46% additional inventory compared to the same time in 2024, which leads to more questions about where inventory will grow, and what that can do for prices. The current projections at Altos – which is a division of HousingWire’s parent company HW Media – are that home prices will grow modestly by around 3.5% in 2025, but this could change.
Signals are emerging in the data that home prices are showing signs of compression, and the possibility of prices going negative this year particularly if rates remain elevated. That will depress demand, while indications lean on modest increases in inventory.
“It’s a pretty bearish take, but remember that the buyers and sellers are out there with that same fear,” he said. “There are a lot of folks who are sitting on the sidelines waiting for the crash to happen. And so the data is the antidote to fear.”
Home sales figures
Because home sales are coming in slightly below where they were last year, the headlines will be that the first quarter of 2025 saw declining home sales. With this week’s newly-released pending sales data, they again came in between 3-5% below where they were one year ago.
“I’m looking for what turns around,” he said. “[These trends] are obviously mortgage rate related,” he explained, since it conforms with rates jumping in December. The turnaround point, he added, is when rates hit 6%. When rates fell in the latter part of 2024, it had an immediate impact on sales coupled with price resiliency.
“We also noticed last year that when rates went from 7.5% in May to 6.5% in August, 6.5% didn’t move the needle,” he said. “But when we got close to 6%, that actually gave us momentum for the rest of the fourth quarter. So then suddenly, the fourth quarter had more sales than the year prior.”
If rates reach 6%, buyers feel like they’re getting a generally better deal, and start moving off of the sidelines, he said. But then in January when rates spiked to 7% again, the market activity slowed, and while there have been some slight declines to just under 7%, those moves have not induced more market activity.
Home inventory
There are roughly 640,000 homes on the market as of now, translating to about 30% more unsold homes nationally, though the amount is not evenly distributed nationally. Sun Belt states have far more inventory growth relative to those situated in the Northeast, and a state like Connecticut has 80% fewer homes for sale than in 2024, he said.
Texas, meanwhile, has a higher amount of homes for sale and California is currently leading the nation in regards to active inventory levels surpassing where they stood in 2024.
“What this teaches us is that we are getting close to the old normal levels of unsold inventory, the 2019 levels,” he said. “Buying next year will probably be at the old normal levels of unsold inventory across the country, and that will have an indication for prices.”
One of the reasons that demand hasn’t seen a precipitous fall over the past few years is because of tight inventory dynamics, but now the market is getting closer to a lower level of demand which is likely to have pricing implications going forward.
“If we get into a world where we’re into March and rates are still at 7%, those are signals where I can imagine that prices weaken, then we can get some of those year-over-year home price decline headlines,” he said. “Those headlines will come out months down the road, but you’ll be able to see it in the data here first.”
