Housing Supply Soars, But Unsold Homes May Be Hiding the True Picture of the Market
In November 2024, the U.S. housing market hit a significant milestone, with active listings climbing to their highest level since 2020. While this might seem like a sign of a healthier housing market, there's a critical nuance behind these statistics. The uptick in supply is largely due to a growing number of unsold homes that are sitting stagnant on the market. A closer look at this development reveals a story of overpricing and market inefficiencies that may not bode well for buyers or sellers in the long term.
The Surge in Active Listings: A Closer Look
According to recent data from Redfin, the total number of active listings—homes for sale—rose by 12.1% year-over-year in November 2024, marking a 0.5% increase compared to the previous month. This surge in inventory, however, is not the clear-cut positive development one might expect. A deeper dive into the data reveals that many of these listings have been on the market for far longer than typical.
Over 54% of homes listed in November stayed on the market for at least 60 days without receiving offers—an alarming increase from 49.9% during the same period in 2023. The current trend has led to the slowest home sales pace in four years, with the average time to contract now stretching to 43 days, the highest since 2019. This situation has left many homes unsold, reflecting an underlying issue of price mismatches between sellers and buyers.
The Role of Overpricing in the Stagnation of the Market
Real estate experts, including Meme Loggins, a Redfin Premier agent based in Portland, Oregon, explain that the primary reason behind the growing number of unsold listings is overpriced homes. Loggins emphasizes that while homes priced correctly and in good condition can fly off the market within days, those priced too high are languishing on listings for months.
For many sellers, especially those listing homes under $650,000, the temptation to overprice their properties is leading to extended stays on the market. Loggins highlights that these homes, which typically attract the most competition, are now increasingly being shunned by buyers who recognize the inflated price tags.
The Impact of Regional Differences in Housing Inventory
While the national housing market faces challenges, some regions are experiencing more pronounced issues with stale listings. Florida and Texas, which have seen significant construction booms in recent years, are home to some of the highest rates of unsold homes. Cities like Miami, Austin, and Fort Lauderdale are leading the way in terms of stale inventory, with over 60% of their listings sitting unsold for two months or more.
Florida: A Case Study in Stagnation
In Florida, the housing market is feeling the impact of multiple factors, including rising Homeowners Association (HOA) fees, increasing insurance costs, and frequent natural disasters. These challenges are causing many potential buyers to hesitate. In cities like Tampa, the number of unsold homes has jumped significantly, with 56.9% of listings on the market for more than 60 days—a 12.3% increase compared to last year. This marks the largest rise among the top 50 U.S. metros.
Texas: A Parallel Story
Texas, particularly Austin and San Antonio, has also seen a similar trend. Austin leads the state with 62.4% of listings remaining unsold for two months or more. The state's fast-growing housing market is facing a bottleneck, with buyers and sellers unable to find common ground on price expectations.
The Markets With the Least Stale Listings
Not all U.S. cities are experiencing this issue. Providence, Rhode Island, stands out with the lowest rate of stale listings, as only 38.2% of homes in November were on the market for 60 days or longer. Other cities with relatively low shares of unsold homes include Milwaukee (38.8%) and Montgomery County, Pennsylvania (41.4%).
These areas seem to be managing the price-to-demand balance better, resulting in fewer stagnant listings and quicker sales.
How the Housing Market Could Evolve in 2025
As we move into 2025, several factors are likely to influence the trajectory of the housing market. Firstly, inflationary pressures and rising interest rates may continue to create affordability challenges for homebuyers. Secondly, many sellers may be forced to reassess their pricing strategies if their homes continue to sit unsold for extended periods.
Given that overpricing remains a central issue in many markets, experts predict a potential correction in prices in the coming months. Sellers who fail to adjust their expectations may find themselves competing in a market where buyers are becoming increasingly price-sensitive. On the flip side, buyers may find greater opportunities as inventory levels remain relatively high, albeit with a large portion of that inventory being less-than-desirable.
Insights: Key Takeaways for Buyers and Sellers in the 2024 Housing Market
For Buyers:
- Patience is Key: With many homes sitting on the market for extended periods, buyers may find opportunities to negotiate better deals.
- Watch for Price Reductions: Sellers who have overestimated the market value of their homes may eventually lower prices, creating potential bargains.
- Regional Variability: Some markets are more balanced than others. Consider areas with fewer stale listings to improve your chances of finding a home quickly.
For Sellers:
- Price Competitively: Ensure your home is priced according to current market trends. Overpricing can lead to extended days on market and eventual price reductions.
- Improve Home Condition: Homes that are in good condition and attractively priced are more likely to sell quickly.
- Consider Market Timing: If your home has been sitting for a while without offers, it may be worth revisiting your pricing and marketing strategies.
By understanding the nuances of the housing market and recognizing the role of overpricing and stagnant inventory, both buyers and sellers can make more informed decisions in 2025. While supply may have reached a high point, the true health of the housing market depends on the rate at which homes are moving and whether price adjustments can align with buyer expectations.
