Home sales in 2024 dropped to their lowest level in nearly three decades as high mortgage rates and high property prices discouraged both buyers and sellers from participating in the housing market.
Americans sold just 4.06 million previously-owned homes throughout the year, marking the lowest annual total since 1995, according to data released Friday by the National Association of Realtors.
This decline represents the third consecutive year of reduced sales and a significant drop from 2021, when 6.1 million homes were sold.
“The total cost of homeownership is now higher than it has ever been,” said Dan Richards, president of Flyhomes Mortgage, a Seattle-based firm.
“The current challenge for consumers is that mortgage rates have surged, yet home prices have remained elevated. Today, both the cost of borrowing and the price of homes are significantly higher.”
Despite the year-long slump, the final quarter of 2024 showed some signs of improvement. December sales reached an annualized rate of 4.24 million, a 9.3% increase compared to December 2023.
However, limited housing inventory continues to drive up prices. By December, the national median sales price had risen to $404,400, reflecting a 6% year-over-year increase. For all of 2024, the median home price set a new record at $407,500.
The lack of available homes also remains a challenge. At December’s pace of sales, it would take only 3.3 months to deplete the current housing supply, which is roughly half the long-term average of six months.
As 2025 begins, the housing market faces ongoing challenges, particularly from persistently high mortgage rates. Rates climbed during each of the first three weeks of January and are now hovering around 7%. Analysts predict that federal policy decisions will likely maintain upward pressure on inflation and borrowing costs.
Redfin’s Homebuyer Demand Index—a measure that tracks buyer activity such as home tours and other agent services—remains near its lowest level since June, according to an email statement from the national brokerage on Thursday. Redfin also reported that the average time on the market for a home has increased to 52 days, the longest average in two years.
Consumer sentiment surveys further reflect this sluggishness. The Fannie Mae Home Purchase Sentiment Index declined in December, though it remained higher than at the same time in 2023. Fannie Mae economists attributed this improvement to “ongoing mortgage rate optimism,” as noted in a January release.
“While buyers remain frustrated by the pandemic-driven increase in home prices and mortgage rates, the gradual improvement in homebuying sentiment in 2024 may suggest that people are slowly adjusting to the new, less-affordable market conditions,” Fannie Mae economists added.
Richards from Flyhomes anticipates that housing market activity will gradually rebound in 2025.
“There’s both a practical and psychological adjustment taking place,” he explained. “As we move further from the era of 3% mortgage rates, people will begin to perceive rates in the 6-7% range as more ‘normal.’”