The U.S. housing market saw a modest recovery in the final months of 2024, as existing home sales climbed for the third consecutive month. According to the National Association of Realtors (NAR), contract closings for existing homes in December increased by 2.2% to an annualized rate of 4.24 million, marking the highest level since February. This growth suggests that both buyers and sellers are adjusting to mortgage rates hovering around 7%.
The steady rise in monthly sales represents the longest streak of gains since late 2021 when mortgage rates were significantly lower. While the housing market remains constrained by affordability concerns and limited inventory, the recent uptick signals some level of stabilization, particularly in the new-home sector.
A Market in Transition
Despite the late-year rebound, 2024 recorded the lowest number of home sales since 1995, when the U.S. population was approximately 70 million fewer than today. It also marked the third straight year of declining sales, a trend previously observed during the 2006 housing crisis and recessions of the early 1980s and 1990s.
Looking ahead to 2025, economists caution that while conditions may improve slightly, significant obstacles remain. Robert Frick, a corporate economist at Navy Federal Credit Union, highlighted the continued challenges posed by the “triple threat” of high mortgage rates, soaring home prices, and tight supply.
Meanwhile, home prices continued to rise, with the median sale price climbing 6% year-over-year to $404,400. This increase was largely driven by higher-end market transactions, which pushed overall housing prices to a new annual record.
Inventory and Mortgage Rate Uncertainty
After months of gradual increases, housing inventory saw a seasonal decline of 13.5% in December, though it remained 16.2% higher than the previous year. The reduction in available homes reflects typical year-end trends but also highlights ongoing supply challenges that have plagued the market.
Hopes for a major market shift in 2024 were initially tied to expected Federal Reserve rate cuts. However, mortgage rates closely follow government bond yields, which surged nearly one percentage point in late 2024 due to persistent inflation concerns. This has led analysts to predict that mortgage rates will remain above 6% through at least 2027, limiting affordability for many buyers.
Fast-Moving Market Despite High Rates
Despite affordability concerns, homes continued to sell relatively quickly. In December, 53% of homes sold within a month, unchanged from November, while 16% of properties sold above their listing price. On average, homes remained on the market for 35 days, slightly longer than the 32-day average in the previous month.
Existing home sales, which make up the bulk of U.S. housing transactions, are tracked based on completed contract closings. The government is set to release new-home sales data in the coming days, providing further insight into the broader housing market trends.
Economic Factors Impacting Housing
Beyond real estate, economic data released on Friday pointed to a cooling U.S. business sector and declining consumer sentiment. Concerns over potential rising unemployment and the impact of tariffs on inflation have weighed on consumer confidence. Meanwhile, elevated Treasury yields reflect investor concerns over federal policies and inflationary pressures, further influencing mortgage rate expectations.
While the housing market has shown resilience in recent months, continued uncertainty around interest rates, affordability, and supply constraints will play a crucial role in shaping trends throughout 2025.