February 3, 2025 | 3 Minute Read
The U.S. residential real estate market is showing signs of thawing after a slow December, with a surge in new listings and a gradual easing of the “lock-in” effect. This shift presents opportunities for real estate investors looking to scoop up properties at favorable prices before the market fully adjusts.
The Lock-In Effect is Easing—More Inventory for Investors
The “lock-in effect” has kept many homeowners from selling, as they hesitated to trade their low mortgage rates for today’s higher ones. However, January data suggests that sellers are increasingly accepting the new mortgage rate environment. Despite 30-year fixed mortgage rates remaining close to 7%, homeowners are listing their properties at a growing rate.
For investors, this means more inventory to choose from and potentially better deals. As more sellers enter the market, competition among them could lead to price reductions or negotiable terms, creating a window of opportunity to acquire properties at lower costs.
According to Realtor.com’s January housing report, newly listed homes rose 10.8% year over year—the highest level of new listing activity for a January since 2021. Moreover, new listings jumped 37.5% compared to December, marking the largest month-over-month increase in five years.
This increased inventory is crucial for investors, particularly those employing strategies like BRRRR (Buy, Rehab, Rent, Refinance, Repeat). More homes on the market mean better options for acquiring undervalued properties that can be improved and rented out for long-term growth.
Growing Inventory Opens Up Value-Add Opportunities
Overall home inventory in the U.S. was up 24.6% year over year, continuing 15 consecutive months of growth. However, inventory is still 24.8% below pre-pandemic levels (2017-2019), meaning demand remains relatively strong.
For investors, this is a prime time to target value-add properties. More inventory gives investors access to distressed or outdated homes that can be renovated and flipped or held as rental properties to generate cash flow.
Buyer Hesitation Could Mean Negotiation Leverage
Despite increased listings, buyers remain hesitant. The average home sat on the market for 73 days in January—the slowest pace since 2020. This suggests that sellers may be more willing to negotiate, particularly if their properties have been listed for an extended period.
Investors can leverage this buyer hesitancy to negotiate better terms, including price reductions, seller concessions, or creative financing options. Additionally, with 15.6% of sellers reducing their asking prices, there’s a strong case for making offers below list price.
Price Trends Favor Investors
The national median list price in January was $400,500, down 2.2% year over year. While this may appear as a market slowdown, the real story lies in the types of properties hitting the market—smaller homes, which skew the median price downward. However, the median price per square foot actually increased by 1.2%, indicating property values are holding steady.
For investors, this means that while prices may appear to be declining, property values remain strong, reinforcing the long-term appreciation potential of real estate assets. Those looking to acquire rental properties should focus on high-demand areas where home values are poised for continued growth.
Markets with rising inventory provide investors with more choices, making it easier to find deals that fit with their strategy, whether it be flipping, rental income, or short-term rentals like Airbnb.
Seizing Opportunities in a Shifting Market
Increased Inventory = More Deals – With more homes hitting the market, investors have more options to find undervalued properties.
Seller Motivation is Rising – Longer days on the market and price reductions indicate better negotiation leverage.
The West and South Present Strong Opportunities – High inventory growth in these regions makes them more attractive for investment.
BRRRR and Value-Add Strategies Shine – More listings create openings for investors to rehab, refinance, and rent properties at strong yields.
Short-Term Hesitation, Long-Term Gains – While buyers remain cautious, property values remain strong, ensuring long-term appreciation potential.
With the market in transition, investors who act strategically can capitalize on the growing inventory, negotiate better deals, and position themselves for significant returns in 2025 and beyond.