Homeownership in the US is becoming increasingly out of reach for many Americans, as sales of previously occupied homes fell to a nearly 30-year low for the second consecutive year in 2024. Elevated mortgage rates, a persistent shortage of homes on the market, and record-high home prices have made it difficult for prospective buyers, especially first-time homebuyers.
According to the National Association of Realtors (NAR), existing home sales fell by 0.7% last year, totaling 4.06 million. This is the weakest showing since 1995 and slightly worse than the poor sales performance in 2023. Despite the overall decline in sales, the national median home price reached an all-time high of $407,500 in 2024, up 4.7% from the previous year.
Lawrence Yun, the NAR’s chief economist, questioned how home sales could be so low despite the US population increasing by over 70 million since 1995. He attributed the decline to affordability issues, including record-high home prices, rising mortgage rates, and a lack of inventory.
The US housing market has been in a slump since 2022 when mortgage rates began to rise from pandemic-era lows. In October 2023, the average rate on a 30-year mortgage hit a 23-year high of nearly 8%, though it briefly fell to a 2-year low in September 2024. It has since hovered around 7%, according to mortgage buyer Freddie Mac.
Higher borrowing costs and soaring home values have significantly reduced the buying power of Americans. With so few homes available, millions of potential buyers have been sidelined. At the end of December, there were only 1.15 million homes on the market, up 16.2% from the previous year but still well below the historical average of 1.98 million since 1999. This limited inventory equates to a 3.3-month supply at the current sales pace, compared to a more balanced market with a 4- to 6-month supply.
Eugenio Aleman, chief economist at Raymond James, noted that the housing market’s problems are worsening in terms of availability and upward pressure on prices. Contributing factors include a decade of below-average new home construction and homeowners holding onto their properties longer. President Donald Trump has pledged to increase the housing supply, but solutions will take time.
Lisa Sturtevant, chief economist at Bright MLS, said that the US has averaged about 5.2 million home sales annually over the past decade. Returning to that level could take years, possibly not until the 2030s, due to the lack of inventory.
While mortgage rates eased in 2020 and 2021, boosting purchasing power, economists predict that the average rate on a 30-year mortgage will remain above 6% in 2025, about twice what it was five years ago. A slight pullback in rates last fall helped increase home sales on a monthly basis in the last three months of 2024.
In December, home sales rose 2.2% from the previous month to an annual pace of 4.24 million, exceeding analysts’ forecasts. Sales were up 9.3% compared to December 2023. The median home sales price increased for the 18th consecutive month to $404,000, up 6% from the previous year.
Limited inventory, especially in more affordable price ranges, continues to drive prices higher, making it harder for first-time homebuyers who lack home equity for a down payment. First-time buyers accounted for 31% of homes sold in December, up from 30% in November and 29% in December 2023. However, their annual share was only 24%, compared to the historical average of 40%.
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