U.S. existing home sales rose 2.2% in December to a seasonally adjusted annual rate of 4.24 million units, the highest since February, according to the National Association of Realtors. However, sales for 2024 were the lowest in three decades, with only 4.06 million homes sold. High mortgage rates and record home prices, with a median of $407,500 last year, continue to limit buyer activity.
Sales increased in the South, West, and Northeast but fell in the Midwest. Transactions surged 9.3% year-on-year, largely for homes priced above $500,000. While housing inventory rose 16.2% compared to a year ago, it remains 30% below pre-pandemic levels. December’s inventory stood at 1.15 million units, representing a 3.3-month supply, below the 4-to-7-month healthy range.
Affordability remains a major challenge, with mortgage rates nearing 7%. First-time buyers comprised just 31% of sales, well below the 40% needed for a strong market. Properties stayed on the market for an average of 35 days, longer than last year’s 29 days.
Economists expect weak sales in the near term, citing elevated rates and competitive pricing for new homes. Fannie Mae forecasts the 30-year fixed mortgage rate to average 6.7% in Q1 2025. Cash transactions accounted for 28% of sales, while distressed sales held steady at 2%.
Inflationary pressures and the Federal Reserve’s cautious rate-cut strategy further cloud the housing outlook. With stagnant affordability and subdued homebuying sentiment, experts predict limited gains for the housing market in the coming months.
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