US home sales in 2024 fell to their lowest level since 1995

Washington
CNN
–

Existing home sales in the U.S. fell to their lowest level in nearly three decades last year as sky-high home prices and elevated mortgage rates squeezed home.

Sales of previously owned homes, which make up the vast majority of the market, were 4.06 million in 2024, the National Association of Realtors said Friday. This is the lowest level since 1995 and slightly below 2023’s similarly anemic levels.

The average interest rate on a conventional 30-year fixed mortgage peaked at 7.22% last year. After briefly slipping to nearly 6%, it has picked up in recent weeks, reaching 7.04% last week and falling to 6.96% this week, according to Freddie Mac.

The median price of an existing home, meanwhile, has increased for 18 consecutive months, reaching a record high of $407,500 in 2024. In December, the average price was $404,400.

Despite the difficult conditions for buyers, there was some momentum towards the end of 2024, with sales of existing homes rising 2.2% in December to 2.24 million from the previous month, the fastest pace since February 2024.

“Home sales in the final months of the year showed a solid recovery despite increased mortgage rates,” NAR chief economist Lawrence Yun said in a news release. “Consumers clearly understand the long-term benefits of homeownership. Job and wage gains as well as increased inventory are having a positive impact on the market. “

The U.S. housing market may not improve much for buyers this year.

Mortgage rates are expected to remain above 6% through 2026. Mortgage rates were also high in the 1980s, but home prices were much lower then. Buyers today are struggling with real estate prices, which continue to hover near unprecedented highs.

In some markets, homeowners have also hit home with rising home insurance policies. That won’t change this year.

Another long-standing housing affordability issue is a persistent shortage of homes on the market. Overall housing inventory has improved throughout 2024, but supply is nowhere near demand.

According to a recent estimate from Freddie MAC, there is a housing shortage of 3.7 million units. In December, inventory stood at 1.15 million units, down 13.5% from November but down 16.2% from a year ago.

A big reason for the undersupply is the so-called lock-in effect, where some homeowners who locked in a low mortgage rate before the Federal Reserve locked in a mortgage with a much higher interest rate when they bought another home.

However, some sold last year due to life events such as marriage, divorce or new children, contributing to last year’s steady increase in real estate inventory. The problem this year is that homeowners don’t have much incentive to sell.

According to the National Association of Home Builders, home builder deregulation may also weigh on the cost of large loans last year, but there is a sense of optimism that deregulation could increase the supply of homes this year.

Scott Turner, who is President Donald Trump’s pick to lead the U.S. Department of Housing and Urban Development, said during his confirmation hearing on Capitol Hill that he is committed to reviewing and reducing regulation. Since the Fed will only cut interest rates a handful of times this year, deregulation could play a role in easing housing market pressures.

But reducing regulations likely wouldn’t be enough to offset some of the Trump administration’s promises of tariffs and mass relocation, which could increase the cost of building new homes.