Weekly Housing Market Update: Big Cities Shine With Affordable Luxury

Big cities are in the spotlight this week, and that's due to their affordability.

The Winter 2025 Wall Street Journal/Realtor.com Housing Market Ranking released this week has pinpointed St. Louis as the top luxury housing market in the U.S. for the third straight quarter while Detroit comes in at No. 2. These metros topped the list due to a lack of housing supply, which keeps competition elevated.

In the overall housing market ranking, while many of this quarter's top markets are familiar, including No. 1 Canton, OH, the biggest climber into the top was newcomer Trenton, NJ. 

Earlier this week, the Federal Reserve decided to leave its policy rate unchanged at 4.25% to 4.50%. Chairman Jerome Powell called the current policy "meaningfully restrictive" and noted that the committee did not need to hurry to make policy adjustments. Market investors largely expect the Fed to be in its current holding pattern until June.

When we take into account the big picture on this week's data, the U.S. economy, domestically, grew in the fourth quarter, but at a slower pace. And while consumers boosted activity, investment was a weak spot.

Consumer confidence also softened in January, although it remained in its recent range.

Mortgage rates steadied, hovering just below 7% this week, but remain more than 80 basis points above their September low.

Some home sales data began to show the effects of higher rates. Pending home sales—an early-stage indicator based on contract signings for existing-home sales—slipped 5.5% in December and were below the year-ago pace. However, new-home sales ticked higher, to 3.6% month over month and 6.7% year over year.

The latest Realtor.com New Construction Insights report showed that in the fourth quarter, the median list price of new homes slipped 0.7% to $449,967, and the price premium for new homes over existing homes shrank, which might help to explain the mixed trends in home sales. 

Perhaps most interestingly, the report showed that while both new- and existing-home sellers will occasionally offer mortgage rate buydowns to buyers, the share of new homes with this incentive is nearly four times as large as the share among existing homes. Put simply, if you’re after a seller-funded mortgage rate buydown, you’re more likely to find it in a newly built home.

Realtor.com January housing data shows an active start to the year for sellers with newly listed homes growing by nearly 11% from a year ago. Some of the increase is likely a residual benefit from fall's lower mortgage rates that could fade, but drivers such as the need for families to adapt to life changes and the easing of the lock-in effect are also at play and would mean more lasting improvement.

Realtor.com weekly data shows that while seller engagement and softer asking prices were observed throughout the month, the gap in time on the market shrank in each of the past three weeks.