Why has housing inventory growth slowed?

Growth in total active inventory has been my favorite story for housing in 2025, but that inventory growth has slowed recently, and today’s Housing Market Tracker will focus on why. Inventory growth was running at 33% year over year a few months ago, but it dropped to 17.66% last week. Let’s find out what happened.

Weekly housing inventory data

In recent years, our inventory data has grown steadily in August, but this year it hasn’t. I initially believed that we had not yet reached the peak of active inventory in 2025, but I’ve been proven wrong. Now we are entering the phase where inventory typically experiences its seasonal decline.

What’s interesting is that inventory growth was excellent earlier this year, but I noted a change in housing dynamics starting in mid-June. Let’s connect the dots:

– Our new listings data peaked on May 23, which is the earliest time frame in recent history to have that occur. Additionally, we experienced no significant growth during the peak months of 2025.

– Also in May, some sellers didn’t get the price they wanted and started to withdraw their listings. Remember, most sellers are also homebuyers, and elevated mortgage rates probably discouraged some home sellers this year from keeping their homes on the market.

– Then mortgage rates started to creep lower, and they have now been below the key level of 6.64% for nine straight weeks, which has facilitated the best nine weeks of purchase applications data. Demand has picked up a bit, removing supply from the market more quickly.

Keep it as simple as that, and it can explain why the growth rate of inventory was excellent early in the year, but really started to slow at the midpoint in June.

• Weekly inventory change (Sept. 26-Oct. 3): Inventory rose from 862,575 to 863,972
• The same week last year (Sept. 27-Oct. 4): Inventory rose from 731,010 to 734,257

New listings data

The new listings data peaked during the week of May 23 this year, reaching a total of 83,143 listings. Since then, the number of new listings has gradually declined. This has been a significant factor in slowing inventory growth from its strong start. Usually, we see new listings data trending between 80,000 and 100,000 during the seasonal peak months, which didn’t really happen this year. 

For some perspective, during the years of the housing bubble crash, new listings were soaring between 250,000 and 400,000 per week for many years. Here’s last week’s new listings data over the past two years:

• 2025: 64,328
• 2024: 60,629

Price-cut percentage

In an average year, approximately one-third of homes experience price reductions. Homeowners often lower their sale prices when inventory levels increase and mortgage rates remain high, which is why the percentage of price reductions is greater in 2025 than it was last year.

For my 2025 price forecast, I anticipated a modest increase in home prices of approximately 1.77%. This suggests that 2025 will likely see negative real-home prices. In 2024, my forecast of a 2.33% increase proved inaccurate, primarily because rates fell to around 6% and demand improved in the second half of the year. As a result, home prices increased by 4% in 2024. The rise in price reductions this year compared to last year reinforces my cautious growth forecast for 2025. This data line growth rate has also cooled down recently.

Price cut percentage last week for the last two years: 

• 2025: 41.8%
• 2024: 39%

10-year yield and mortgage rates

In my 2025 forecast, I anticipated the following ranges:

• Mortgage rates between 5.75% and 7.25%
• The 10-year yield fluctuating between 3.80% and 4.70%

Last week was jobs week, but with the government shutdown, we didn’t have the final job reports for the week, which included jobless claims on Thursday and the big BLS jobs report on Friday, which the Fed tracks so closely. The 10-year yield didn’t have too much of a crazy week and ended the week at 4.12%.

Mortgage rates fell slightly this week from 6.38% to 6.34%, The two jobs reports we did have this last week — the job openings and the ADP report — were soft, which kept a lid on bond yields this week.

Mortgage spreads

Mortgage spreads have been the best story for mortgage rates in 2025. At one point this year, we were just 0.35% away from normal spread levels, and we reached 0.2% basis points away from my peak improvement forecast for 2025 for mortgage spreads.

Historically, mortgage spreads have ranged between 1.60% and 1.80%. If the spreads today were as bad as they were at the peak of 2023, mortgage rates would currently be 0.91% higher. Conversely, if the spreads returned to their normal range, mortgage rates would be 0.59% to 0.39% lower than today’s level. Normal spreads would mean mortgage rates at 5.75% to 5.95% today.

Purchase application data

Purchase application data last week declined 1% week to week, while showing 16% growth year over year. 

Here is the weekly data for 2025 so far:

• 19  positive readings
• 13 negative readings
• 6 flat prints
• 35 straight weeks of positive year-over-year data
• 22 consecutive weeks of double-digit growth year over year

Since mortgage rates fell below 6.64% and headed toward 6% — the key level I have talked about for years — the weekly data has had:

• 7 positive weeks
• 2 negative weeks
• 9 straight weeks of double-digit growth year over year

We typically require about 12-14 weeks of consistent, positive weekly purchase app data to have a material impact. The last nine weeks have been the best of the year in terms of week-to-week data. Purchase apps look out 30-90 days to sales.

Weekly pending sales

Our weekly pending home sales provide a week-to-week glimpse into the data, although pending sales can be influenced by holidays and short-term fluctuations. We are still showing slight year-over-year growth in this data line. The pending sales data will typically be reflected in the existing home sales report 30-60 days after the sale is finalized. Last week was our highest weekly pending home sales data for this calendar year since the market crash in 2022.

Weekly pending sales for last week:

• 2025: 64,232
• 2024: 61,043

The week ahead: Fed speeches and government shutdown news?

Assuming the government remains shut down, we won’t get the jobless claims report. We will still have some bond auctions and a multitude of Fed members speaking. On the economic front, not much will change for the weekly calendar, but we will be keeping a close eye on any news regarding the reopening of the government.

On the housing front, the longer this shutdown lasts, the more delays can occur in closings. It’s a big week to see which party blinks first, but the following week is inflation week, and both the CPI and PPI inflation reports come from the government, so if the shutdown continues, we won’t have those data lines to report.