US home sales in 2024 fell to lowest level since 1995

Washington CNN –

U.S. existing home sales fell last year to the lowest level in nearly three decades as high home prices and high mortgage rates squeezed homebuyers.

Sales of previously owned homes, which make up the vast majority of the market, totaled 4.06 million in 2024, the National Association of Realtors said Friday. This is the lowest level since 1995 and slightly lower than in 2023.

The average rate on a conventional 30-year fixed mortgage reached a peak of 7.22% last year. After briefly sliding to nearly 6%, it has narrowed 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 climbed for 18 months straight, reaching a record high of $407,500 in 2024. In December, the median price was $404,400.

Despite the challenging conditions for buyers, there has been some momentum towards the end of 2024, with existing home sales increasing 2.2% in December of the previous month to a seasonally adjusted annual rate of 4.24 million , the fastest rate since February 2024.

Home sales in the final months of the year showed a solid recovery despite high mortgage rates, NAR chief economist Lawrence Yun said in a statement. Consumers clearly understand the long-term benefits of homeownership. Job and wage gains, as well as an increase in 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. Buyers these days are competing with home prices that continue to hover at nearly all-time highs.

And in some markets, homeowners are also facing skyrocketing homeowners insurance premiums. This should not change this year.

Another long-standing problem for housing affordability is a persistent lack of homes on the market. Total housing inventory has improved throughout 2024, but supply is nowhere near demand.

There is a housing shortage of 3.7 million units, according to a recent estimate from Freddie Mac. Inventories in December stood at 1.15 million units, down 13.5% from November, but up 16.2% from a year earlier.

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 begins raising interest rates in 2022 prefer not to sell because they would have to take Mortgage with a much higher rate if they bought another house.

However, some sold last year due to life events such as marriage, divorce or new children, contributing to a steady increase in recent years in housing inventory. The problem for this year is that owners don't have much incentive to sell.

High borrowing costs also weighed on home construction last year, but there is a sense of optimism among builders that deregulation could boost the supply of homes this year, according to the National Association of Home Builders.

Scott Turner, who is President Donald Trump's pick at 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 regulations. Given that the Fed is expected to cut interest rates only a few times this year, deregulation could play a role in easing pressure on the housing market.

But reducing regulations probably wouldn't be enough to offset some of the Trump administration's promises of tariffs and mass deportations, which could add to the cost of building new homes.

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