Home sales plummeted to a new low in 2024 as heightened mortgage rates and elevated property prices deterred both buyers and sellers from entering the housing market.
Last year, Americans sold 4.06 million previously-owned homes, marking the lowest figure since 1995, according to the National Association of Realtors. This downturn, observed for the third consecutive year, represents a significant drop from the 6.1 million transactions recorded in 2021.
“The overall cost of owning a home is now higher than ever before,” commented Dan Richards, president of Seattle-based Flyhomes Mortgage. “The double whammy for homebuyers is the steep rise in mortgage rates coupled with stubbornly high home prices. Consequently, both borrowing costs and home prices are squeezing consumers.”
However, there was a slight rebound in the last quarter of the year: December saw an annualized rate of 4.24 million home sales, a 9.3% increase from December 2023.
Despite a low housing inventory failing to meet demand, home prices continued to climb. The median national sales price in December reached $404,400, which was a 6% increase from the previous year. For the entirety of 2024, the median price rose to a record $407,500.
At the current sales rate from December, it would only take 3.3 months to deplete the existing home inventory, significantly less than the long-standing average supply duration of six months.
Persistent High Mortgage Rates as 2025 Begins
Challenging conditions persist in the housing market as 2025 commences.
Mortgage rates have escalated during the first three weeks of January, now hovering around 7%. Many analysts believe that policies in Washington will continue to exert upward pressure on inflation and lending rates.
The Redfin Homebuyer Demand Index, which tracks agent-led tours and other purchasing activities, is currently at one of its lowest points since June, as reported by the national brokerage in a recent email statement. The time it takes to sell homes has also increased, now averaging 52 days—the longest period in two years, according to Redfin.
This slowdown in market activity mirrors the trends observed in consumer sentiment surveys. Although the Fannie Mae Home Purchase Sentiment Index saw a slight increase in December compared to the previous year, it was still notably low, as reported by the mortgage guarantor earlier in January. This, they suggest, is partly due to a lingering optimism about mortgage rates.
“Despite the discouragement from high home prices and mortgage rates that surged during the pandemic, the gradual increase in homebuying sentiment throughout 2024 might indicate a slow adjustment to the less affordable market conditions,” the statement explained.
Dan Richards from Flyhomes anticipates a pickup in market activity in 2025.
“A shift, both practical and psychological, needs to occur,” he stated. “As we move further from the era of 3% mortgage rates, rates in the range of 6-7% will begin to feel more typical.”
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Passionate about analyzing economic markets, Alice M. Carter joined THE NORTHERN FORUM with a mission: to make financial concepts accessible to everyone. With over 10 years of experience in economic journalism, she specializes in global economic trends and US financial policies. She firmly believes that a better understanding of the economy is the key to a more informed future.