2024 US Home Sales Hit Lowest Level in Nearly 30 Years
Slump Continues as Mortgage Rates and Home Prices Rise
The latest evidence that homeownership is becoming increasingly less accessible to many Americans: Sales of previously occupied U.S. homes fell last year to a nearly 30-year low for the second time in as many years.
Elevated mortgage rates, a yearslong shortage of homes on the market, and record-high home prices continued to stymie prospective home shoppers, especially first-time buyers.
Weak Showing for Home Sales
Existing home sales fell 0.7% last year to 4.06 million — the weakest showing for home sales since 1995 and edging out the terrible year for sales in 2023, the National Association of Realtors said.
National Median Home Price Reaches All-Time High
Even in the midst of a sales slump, a dearth of homes on the market and rising mortgage rates gave sellers an edge over buyers, helping drive up the national median home price for all of last year to an all-time high $407,500, an increase of 4.7% from a year earlier.
Economists Weigh In
“How is it possible that home sales can be this low, considering that the U.S. population has increased by more than 70 million over this time period from 1995 to today?” asked Lawrence Yun, the NAR’s chief economist. “One can partly answer that question because of the affordability issue. Record-high home prices, mortgage rates having risen, but also lack of inventory.”
Challenges Facing Homebuyers
The U.S. housing market has been in a sales slump dating back to 2022, when mortgage rates began to climb from pandemic-era lows. The average rate on a 30-year mortgage surged to a 23-year high of nearly 8% in October 2023 and briefly fell to a 2-year low last September, but has been mostly hovering around 7%, according to mortgage buyer Freddie Mac.
The buying power of Americans now facing higher costs to borrow money for homes that have soared in value has been significantly stunted. With so few homes up for sale, millions of would-be homebuyers have found themselves on the sidelines.
Inventory Remains Low
At the end of December, there were just 1.15 million homes on the market, NAR said. While that was up 16.2% from a year earlier, the inventory remained well below the annual historical average of about 1.98 million, according to data going back to 1999.
Impact on First-Time Buyers
Many first-time homebuyers, who don’t have any home equity to put toward their down payment, continue to struggle. They accounted for 31% of all homes sold last month, up from 30% in November and 29% in December 2023. However, the annual share of first-time buyers was 24%. It’s been 40% historically.
Conclusion
The ongoing slump in home sales is a clear indication that the U.S. housing market is facing significant challenges. Elevated mortgage rates, a shortage of homes on the market, and record-high home prices are all contributing to a difficult environment for homebuyers. While some economists predict that mortgage rates may ease this year, it’s unclear when the market will return to a more balanced state.
FAQs
Q: Why are home sales declining?
A: Home sales are declining due to elevated mortgage rates, a shortage of homes on the market, and record-high home prices.
Q: What is the current state of the U.S. housing market?
A: The U.S. housing market is experiencing a sales slump, with home sales falling to a nearly 30-year low.
Q: What is the impact on first-time homebuyers?
A: First-time homebuyers are struggling to enter the market due to the affordability issue, with many facing higher costs to borrow money for homes that have soared in value.
Q: When will the market return to a more balanced state?
A: It is unclear when the market will return to a more balanced state, but economists predict that it will take years before the U.S. housing market returns to its historical average of 5.2 million home sales annually.
