Washington (AFP) – Sales of previously owned US homes slipped to their weakest level in about three decades last year on the back of high housing prices and mortgage rates, according to industry data released Friday. Existing home sales came in at 4.06 million on an annual basis in 2024, the lowest level since 1995, said the National Association of Realtors (NAR). The weakness came despite population and job growth over the past three decades, NAR chief economist Lawrence Yun said on a call with reporters.
But he pointed to affordability issues with elevated home prices, alongside higher mortgage rates and a lack of inventory to explain the trend. In December, however, existing home sales rose by 2.2 percent from November, reaching a seasonally adjusted annual rate of 4.2 million, the NAR said. This was its strongest pace since February 2024 — and in line with analysts’ expectations. “Home sales in the final months of the year showed solid recovery despite elevated mortgage rates,” said Yun in a statement.
While sales during the winter months are typically softer than in the spring and summer, “momentum is rising with sales climbing year-over-year for three straight months,” Yun added. “Job and wage gains, along with increased inventory, are positively impacting the market,” he said. From a year ago, existing home sales were up 9.3 percent in December — the largest year-on-year gain since June 2021 — the NAR said.
Meanwhile, the median sales price jumped by 6.0 percent from a year ago, to $404,400 last month. The growth in sales came despite the popular 30-year fixed-rate mortgage averaging nearly 6.9 percent as of December 26, according to Freddie Mac data. “The prospects for this year look better, but not by much as the triple threat of high mortgage rates, high home prices and low supply will continue,” said economist Robert Frick with the Navy Federal Credit Union.
Even with builders poised to add more homes, they will be constrained with interest rates still elevated. And homebuyers, Frick said, will likely face mortgage rates between 6.5 and 7.0 percent. Economist Oliver Allen of Pantheon Macroeconomics expects the fourth quarter’s home sales increase “will unwind in the first quarter” of 2025, given a rebound in mortgage rates recently.
Carl Weinberg and Mary Chen of High Frequency Economics expect home sales data will not weigh on the US central bank’s upcoming interest rate decision. The Federal Reserve is cutting rates in slow motion and the housing market has been weak for a while, they said. “The Fed will not start rushing its next rate cut to boost a single sector,” they added. The Fed’s rate-setting committee is set to meet next week.
© 2024 AFP
