US Home Price Growth Slows in January as Inventory Improves

The US housing market experienced a slowdown in home price growth in January 2025, with prices rising at a slower pace than in previous months. This moderation can be attributed to several factors, including elevated mortgage rates, increasing inventory levels, slowing sales activity, and regional disparities in home price trends.

Mortgage rates have played a significant role in the recent housing market trends. In January 2025, the average 30-year mortgage rate was 6.84%, still relatively high compared to historical norms. This high interest rate environment has reduced buyer purchasing power, making homes less affordable and contributing to the slowdown in home price growth.

The improvement in housing inventory has also impacted the housing market dynamics. As of January 2025, the inventory of existing homes for sale was at 1.37 million, up 0.7% from the previous month. This increase in inventory has provided buyers with more options, reducing the competitive pressure on the market and contributing to the moderation in home price growth.

Slowing sales activity has also contributed to the moderation in home price growth. Existing home sales rose by 3.4% month-over-month in October 2024, but overall demand remains low. The slowdown in sales activity has put downward pressure on home prices, as buyers have more time to consider their options and negotiate better terms.

Regional disparities in home price trends have also contributed to the slowdown in US home price growth. Some metropolitan areas have experienced significant price declines, while others have continued to see growth. For example, in January 2025, Tampa, FL, and Oakland, CA, saw the largest month-over-month decreases in home prices at -1.6% and -0.7%, respectively. In contrast, Pittsburgh, PA, and Nassau County, NY, experienced the highest month-over-month gains at 3% and 2.8%, respectively.

Looking ahead, mortgage rates are expected to ease in 2025, potentially unleashing some of the pent-up demand for housing. However, the extent to which mortgage rates will decrease remains uncertain, and buyers should expect plenty of ups and downs throughout the year. As inventory levels continue to improve, the housing market is expected to become more balanced, benefiting both buyers and sellers.

In conclusion, the slowdown in US home price growth in January 2025 can be attributed to elevated mortgage rates, increasing inventory levels, slowing sales activity, and regional disparities in home price trends. As these factors evolve in the coming months, the pace of home price growth may continue to moderate, but the extent of the slowdown will depend on various regional and market-specific factors.