In 2024, U.S. home sales reached their lowest level in nearly three decades, reflecting the growing challenges faced by prospective homeowners. According to the National Association of Realtors (NAR), sales of previously owned homes fell by 0.7%, totaling 4.06 million units—the weakest performance since 1995. This decline is largely due to elevated mortgage rates, a prolonged shortage of available homes, and record-high prices. Despite the downturn, sellers remained in control, driving the national median home price to an all-time high of $407,500, a 4.7% increase from the previous year. NAR Chief Economist Lawrence Yun highlighted that while the U.S. population has grown, the rising costs of homes and mortgages have severely impacted affordability, reducing opportunities for homeownership.
The Impact of Rising Mortgage Rates
The housing slump began in 2022, coinciding with the rise of mortgage rates from pandemic-era lows. In October 2023, the average rate for a 30-year mortgage peaked at nearly 8%, although it briefly dropped to around 6% in September 2024. These high borrowing costs have significantly diminished the buying power of many Americans, further sidelining potential homebuyers. As of December, only 1.15 million homes were available for sale, up 16.2% from the previous year, but still far below the historical annual average of about 1.98 million homes. This equates to a 3.3-month supply, well below the ideal four to six months for a balanced market.
Contributing Factors to the Housing Shortage
The ongoing housing shortage has been influenced by multiple factors, including over a decade of underbuilding and homeowners choosing to stay in their homes longer. Although prior administrations have focused on increasing housing supply, experts predict that addressing the gap will take considerable time. Chief economist Lisa Sturtevant suggests that it could be well into the 2030s before home sales return to the long-term average of 5.2 million annually, a level that has been common over the past decade.
A Temporary Boost in December Sales
While mortgage rates have seen some declines, offering a brief boost to purchasing power, the overall inventory remains limited. This shortage has particularly affected first-time homebuyers, who made up 31% of sales in December—still lower than the historical average of 40%. Despite a 2.2% increase in sales during December, the lack of affordable homes continues to be a major obstacle for many buyers, especially those entering the market for the first time.
