The final figures for home sales last year are in, and the story is quite grim: 2024 was the slowest year for existing home sales in nearly three decades.
Existing-home sales last year totaled 4.06 million, the lowest on an annual basis since 1995, according to the National Association of Realtors on Friday.
A big factor behind the slowdown was elevated mortgage rates, which spent most of the year above 6.5%.
Although rates hit a low of 6.08% in late September — just after the Federal Reserve cut interest rates for the first time since 2020 — they've climbed again lately. Last week. the average rate on a 30-year mortgage passed the 7% mark, before dropping slightly this week to 6.96%.
Experts say rates of 6-7% are the new normal.
"Economic and monetary policy uncertainty and inflationary concerns will likely keep mortgage rates elevated for the near future," said Mortgage Bankers Association President and CEO Bob Broeksmit in a statement.
Meanwhile, prices on homes that did sell have been very high, as more sales at the high end of the market nudged median prices higher. The median home price reached $407,500 in 2024, a record high.
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But there are some signs of loosening: existing home sales in December were 9.3% higher than a year earlier.
"Home sales in the final months of the year showed solid recovery despite elevated mortgage rates," said NAR Chief Economist Lawrence Yun in a statement. "Home sales during the winter are typically softer than the spring and summer, but momentum is rising with sales climbing year-over-year for three straight months ... Job and wage gains, along with increased inventory, are positively impacting the market."
A tough sell to give up low rates
It's not just that mortgage rates are high — it's that so many current homeowners locked in rates below 4% just a few years ago when the U.S. was enjoying low interest rates.
Danushka Nanayakkara, assistant vice president for forecasting at the National Association of Homebuilders, says many would-be buyers and sellers "have locked into those historic low mortgage rates in 2021, 2022."
"And I think right now the fact that the mortgage rates are hovering close to 7%, it's very difficult to convince this group of people to let them go, and become move-up buyers," she says.
Traditionally, she says, people buy a starter home and then after about seven or eight years, they move on to a pricier home.
But letting go of a very low mortgage rate is a tough sell, and high home prices don't make it any easier — meaning there haven't been many options to choose from for home-shoppers.
"Taken all together, the cost of borrowing, the fact that the mortgage rates are really high, high home prices and the low levels of inventory — I think these are all factors that played a role in existing home sales slowing down last year," says Nanayakkara.
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More supply is arriving
At least there's some good news in terms of supply.
Last year was a good one for the completion of more housing: An estimated 1.63 million housing units were completed in 2024, according to Census data, or 12.4% above the 2023 figure.
As existing home sales have slowed, sales of new homes have become a larger part of the market — about 30%, says Nanayakkara. There's now significantly more inventory of new homes for sale than there is of existing homes for sale.
Despite the slow year for existing home sales, there's still great demand for housing, especially affordable housing. But home builders are facing challenges: high borrowing costs, a tight labor market, and rising material prices.
"This makes it difficult for the builders to meet that growing need for housing," says Nanayakkara. "At the same time, there's a lot of desire for more affordable, flexible housing solutions, such as townhome developments, multifamily projects, built-for-rent models. It's this delicate balancing act."
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