In 2024, home sales plummeted to unprecedented lows as steep mortgage rates and high property prices kept buyers and sellers from engaging in the housing market.

According to the National Association of Realtors, Americans sold 4.06 million previously-owned homes this year, the lowest figure since 1995. This marks a third straight year of declining sales, a significant drop from 2021’s 6.1 million transactions.

Dan Richards, president of Flyhomes Mortgage in Seattle, explained, “The reality is that the overall expense of homeownership is at an all-time high. Consumers currently face the challenge of increased mortgage rates alongside sustained high prices. Borrowing costs are up, and home prices remain elevated.”

Sales did improve in the last quarter of the year: December showed a sales rate of 4.24 million, a 9.3% increase compared to December 2023.

With the supply of homes still insufficient to satisfy demand, prices continue to rise. The median national sales price in December reached $404,400, a 6% increase from the previous year. For 2024, the average price climbed to a new record of $407,500.

At December’s sales pace, it would take just 3.3 months to deplete the current inventory of homes available—a significant decrease from the historical average of six months.

Mortgage rates remain high at the outset of 2025

The housing market is expected to face significant challenges in 2025.

Mortgage rates increased during the first three weeks of January, nearing the 7% mark. Many analysts believe that policies in Washington will keep inflation and borrowing costs on the rise.

The Redfin Homebuyer Demand Index, which tracks property tours and other buying services provided by agents, is close to its lowest level since June, as mentioned in a recent email from the national brokerage. Homes are taking longer to sell, currently averaging 52 days, the longest duration in two years.

This sluggishness is also reflected in consumer sentiment surveys. The Fannie Mae Home Purchase Sentiment Index experienced a decline in December, although it was still higher than the previous year. Fannie Mae economists noted in early January that this is “partially due to ongoing optimism regarding mortgage rates.”

“While people are still disheartened by the rising home prices and mortgage rates from the pandemic era, the increasing optimism surrounding homebuying in 2024 suggests that buyers are slowly adjusting to the generally less affordable market,” the report stated.

Richards from Flyhomes shares this perspective, anticipating an uptick in market activity in 2025.

“There needs to be both a practical and psychological adjustment,” he explained. “As we move further away from the era of 3% rates, mortgage rates in the 6-7% range will likely start to feel more ‘normal.’”