Housing supply is the highest it’s been since 2020, and while there’s lots to choose from, demand is the lowest it’s been in four years, according to a new Redfin report. 

Redfin attributes the drop in demand to rising housing costs and increasing monthly payments. 

In January, pending home sales dropped to the lowest ever recorded, aside from the start of the pandemic, falling 4.2% month over month to 455,163 transactions, marking the largest decline since August 2023. That represents a 6.3% drop year over year. 

Meanwhile, active listings grew, rising to their highest since early in the pandemic, Redfin found, climbing 0.3% month over month and 12.9% year over year to 1,795,951 listings. 

New listings fared similarly, jumping to 564,642 listings, the highest level since July 2022. The level represents gains of 1.9% month over month and 4.7% year over year.

Redfin said several factors contributed to the rise in housing supply, including the fading of the  mortgage rate lock-in effect and homes lingering on the market longer. In January, the typical home sold was on the market for 56 days, a week longer than last year, marking the longest days on market for any January since 2020. 

Demand also slowed in January, as fewer people were buying homes. Existing home sales fell 1.7%, the largest monthly decline since October 2023.

Redfin attributes the decrease in housing demand to mortgage rates hitting an eight-month high.

In January, the average interest rate on a 30-year fixed mortgage was 6.96%, which is up from 6.72% in December and the highest it’s been since May. January’s median home sale price rose 4.1% from 2024 to $418,581, which is 45% higher than January 2020.

The number of home purchases that fell through in January were the highest for the month since 2017. Last month nearly 41,000 home-purchase agreements were canceled, accounting for 14.3% of homes that went under contract. 

Economic uncertainty is also a contributing factor as buyers and sellers are getting cold feet due to several factors including tariffs, reductions in the federal workforce and mortgage rate uncertainty.

Home prices also rising

Redfin noted that supply and demand is more balanced, with the housing shortage slowly improving. That’s impacting price growth, which is now where it was before the pandemic, growing 4%-5% a year, compared to the double-digit increases we saw in 2021 and 2022. Regardless, prices are still climbing due to limited inventory. 

“On a national scale, we’re seeing an increase in people selling homes and decrease in people buying homes, bringing supply and demand closer to equilibrium. But the national snapshot masks a lot of regional variation,” said Redfin Senior Economist Elijah de la Campa.