In 2024, home sales reached a new low as elevated mortgage rates and high property prices kept both buyers and sellers out of the housing market.

According to the National Association of Realtors, Americans sold 4.06 million existing homes this year, marking the lowest total since 1995. This represents the third year in a row of declining sales and a significant decrease from 2021, when 6.1 million homes were sold.

Dan Richards, president of Flyhomes Mortgage in Seattle, highlighted that “the total cost of homeownership is currently at its highest level ever.” He added that both mortgage rates and home prices are up, making it more expensive for consumers, as they now face higher borrowing costs coupled with increased home prices.

Sales did improve slightly in the last quarter of 2024, reaching an annual rate of 4.24 million in December—a 9.3% increase compared to December 2023.

With housing inventory still lagging behind demand, prices continue to rise. The median sales price nationwide in December was $404,400, reflecting a 6% increase year-over-year. For the entire year of 2024, the median price reached a historic high of $407,500.

If sales maintain the December pace, available home supply would last just 3.3 months, significantly below the long-term average of six months.

High Mortgage Rates Persist into Early 2025

The housing market will encounter significant challenges in 2025.

In January, mortgage rates increased during the first three weeks and are currently around 7%. Analysts anticipate that government policies will continue to exert upward pressure on inflation and borrowing costs.

The Redfin Homebuyer Demand Index, which tracks viewing and purchasing activity, is close to its lowest point since June, according to an email from the national real estate brokerage. Homes are taking longer to sell, with the average time now at 52 days—the longest duration in two years.

This sluggish pace is further illustrated in consumer sentiment surveys. Although the Fannie Mae Home Purchase Sentiment Index fell in December, it remained higher than the previous year, according to the mortgage agency’s report in early January. The increase is attributed to “ongoing optimism regarding mortgage rates,” as noted by Fannie economists.

“Many respondents remain frustrated by the price surges and mortgage rate increases from the pandemic years, but the rising homebuying sentiment in 2024 suggests a gradual adjustment to the less affordable market conditions,” the report stated.

Richards from Flyhomes expects a rebound in market activity in 2025.

He stated, “A practical and psychological shift is necessary. As we distance ourselves from the era of 3% mortgage rates, the 6-7% range will start to feel more ‘normal.’”