33.2% of Listed Homes Have Cut Prices, The Highest Mark For February in Over a Decade

Remember the heady months after the pandemic, when interest rates and inventory were at rock bottom, and house prices and bidding wars for them were through the roof? They have long vanished from sight. Conversely, the number of homes with price reductions has steadily increased in recent weeks. So, is it a buyer’s or seller’s market or somewhere in between?

According to Altos Research, a deeper analysis shows that, over the last year, there are 5% to 10% more sellers each week than last, indicating that the market has slowly been normalizing. However, in recent weeks, that trend has come to a halt. 

Why? Because the inventory surge many people expected—at least in some markets—has not materialized. It means many potential sellers have put the brakes on selling their homes, preferring to stay put until they have a better choice of homes to buy. Consequently, without buyers, the sellers who have listed their homes are getting antsy and lowering their prices.

30% Fewer Sales Than a Year Ago

Altos states that, as of Feb. 10, there are 30% fewer immediate sales now than there were a year ago. Of the 64,000 total sellers in the week beginning Feb. 10, almost 10,000 are already under contract, meaning 54,000 are added to active inventory. And while there were 3.8% more unsold new listings than a year ago, the total count of sellers now is marginally less—64,000 versus 66,000. 

National Association of Realtors (NAR) data in the Wall Street Journal for December shows that existing home sales increased for the third straight time per month, which hasn’t happened since 2021. However, according to Wells Fargo, existing home sales in December were 20% lower than the average pace in 2019.

A Seller’s Malaise

Without inventory or lower rates, sellers have decided that it’s better to hold on to what they have than have to entertain a new rate. While it’s customary for markets to slow down in the winter, the drop in inventory in January and the increase in price reductions is concerning. 

Overall, 27.8% more unsold single-family homes are on the market than last year. However, that number hasn’t grown in several months, and there are still 17% fewer homes for sale than in February 2018.

Price Reductions Are the Highest in a Decade

One possible reason for the slowdown in inventory is that sellers sense what’s going on—that homes are sitting on the market with price drops and are holding off on listing their homes for fear of befalling the same fate. The numbers don’t lie: The percent of homes on the market with price reductions from the original list price is now at the highest level for February in over a decade, with reductions increasing by another 10 basis points for the week beginning Feb. 10 to 33.2%.

Existing U.S. Home Sales Fell to Lowest Level in 30 Years

According to the Wall Street Journal, existing U.S. home sales for 2024 have not been so low since 1995, according to data from NAR. That’s sobering news for investors hoping for an active market with increasing prices. High interest rates, soaring insurance, and increased taxes are largely to blame for the stagnation. 

“The starting point for 2025 is, you’re kind of already starting in a spot with not that much momentum,” Rick Palacios Jr., director of research at John Burns Research & Consulting, told the Journal. “I don’t really see how that thesis reverses and gets more optimistic as long as mortgage rates stay at 7%.”

Is the Market Falling or Flat? 

The increase in reductions could signal a greater pattern for the rest of 2025. Lowering prices is a clear indication a home isn’t selling. To buyers, it’s like a shark sensing blood in the water and a green light to lowball an offer.

According to Altos, as of Feb. 10, the median price for single-family home listings in the U.S. is $425,000—unchanged from a year ago. This is compared to the median price for homes going under contract and scheduled to close in March, which is $389,000, an increase of 2.4% over the previous year—but in real terms, factoring in inflation and other rising costs, it’s a drop. 

Equally, sales are currently 5% fewer than last year, and according to NAR data, existing home sales fell 0.7% in 2024 from the prior year to 4.06 million—all indications of a stagnating market.

The U.S. Housing Market Is Not Monolithic

Before sounding the alarm bells, it’s important to realize that the U.S. housing market is not just one entity. There are still bidding wars in some areas and price drops in others. 

As Altos points out, the recent incremental lowering of prices in some markets is not a reason to sound alarm bells. Rather, it’s a sign that we are probably due for a flat period—which, if incomes continue to rise, could help potential buyers save and be better positioned to purchase homes with the new reality of interest rates remaining around 6% to 7%.

What Investors Should Bear in Mind

The general rule of thumb for investors is that when a market is quiet, it’s the time to make moves. It’s more difficult when interest rates hover around 7% and buyers or sellers aren’t motivated to make a move.

According to U.S. News & World Report, home prices will increase modestly (around 17%) from 2025 to 2029 due to higher interest rates. Tariffs and deportation also remain big unknowns. 

Also worth considering, especially for flippers, is that buyers generally favor newly built homes when inventory is low because builders can offer incentives such as free add-ons, no closing costs, and mortgage rate buydowns. 

All that said, the predicted increase in house prices and rents by various sources (14%-17%) and the tax benefits of owning real estate make rentals a good real estate strategy, particularly in the current market. 

Moves for Investors in the Current Market

Here are some moves investors should consider in the current market.

Flip with caution

Bidding wars and rapidly escalating house prices used to save a bad flip. Those days are gone. Flippers are still making money and doing deals, particularly in tight markets where inventory is low, but every penny needs to be accounted for, from the buying price to the renovation and the sales price. The fact that there are fewer flippers and profits to be made could benefit those flippers who run a tight ship and are adept at finding deals.  

Cash is not always king

Cash flow is usually king, but in the current market, with elevated prices and interest rates, it’s incredibly difficult to buy a house in a decent neighborhood and still cash flow the way you want.

The good news is that competition is not what it once was, so if you plan to buy a rental, negotiate the best deal you can, screen tenants meticulously, and use the home mainly for a tax write-off and equity play, with a goal to cash flow down the line when rates are better and your mortgage is lower. That doesn’t mean you should lose money—you just have to be realistic regarding current market conditions.

There is tremendous demand for rental properties. Wall Street is spending billions of dollars on rental investments with long-term buy-and-hold strategies, and there’s no reason why you shouldn’t do the same. 

Consider the advantages of buying owner-occupied homes

The U.S. offers tremendous incentives for owner-occupants. For rookie investors, utilizing FHA loans to get in a home for 3.5% down and then rinse and repeat after a year or two is a good way to build a portfolio without a huge upfront cost. Should you decide to sell, if you have lived in the home for two out of five years, you can be forgiven most or all of the capital gains taxes on the sale.

If you time your purchases correctly and sell two houses, having lived in both for two out of five years, you could make more money than if you had flipped the houses conventionally. This also works for small multifamily rentals (two to four units).

Final Thoughts

The current market takes a glass-half-full mindset. High interest rates and a decreased buying pool have made transactions challenging, but there is also decreased competition. People still need a place to live, even if sellers are reluctant to list their homes. That is a constant that won’t change. Rentals and renovated single-family homes at the right price will always be in demand.

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