Housing Market Rewind: Home Sales Drop in 2024 to Level Not Seen Since the '90s

The housing market in 2024 experienced a significant downturn, with home sales dropping to a level not seen since the 1990s. This decline can be attributed to several key factors, including elevated mortgage rates, rising home prices, and a persistent lack of housing inventory.

Mortgage rates remained high throughout 2024, with the average rate on a 30-year fixed mortgage hovering around 7%. This limited home hunters' buying power and contributed to the sales slump. According to Freddie Mac, mortgage rates are expected to remain above 6% through 2026, which may continue to hinder affordability for buyers.

Home prices continued to climb in 2024, reaching record highs. The median price of an existing home climbed for 18 months straight, reaching a record high of $407,500 in 2024. In December, the median price was $404,400, up 6% from the same month a year ago. This increase, coupled with higher mortgage rates, has made homeownership less affordable for many buyers.

The housing inventory remained low in 2024, with just 1.15 million homes on the market at the end of the year. This undersupply contributed to the sales slump and helped prop up prices. The so-called lock-in effect, where homeowners with low mortgage rates prefer not to sell, also played a role in keeping inventory low.

Despite the tough conditions for buyers, there was some momentum toward the end of 2024, with existing-home sales rising 2.2% in December from the prior month to a seasonally adjusted annual rate of 4.24 million, the fastest pace since February 2024. However, this momentum may not be enough to offset the long-term challenges facing the housing market.

Political events and policy changes have also played a significant role in shaping the housing market's trajectory in 2024 and will likely continue to influence its future. Factors such as mortgage rates, immigration policies, housing affordability and supply, economic policies, and climate change policies are all influenced by political decisions and can significantly affect the housing market.

In conclusion, the housing market in 2024 faced significant challenges due to high borrowing costs, a lack of inventory, and the potential impact of policies such as tariffs and mass deportations. However, there is some optimism that deregulation could boost the supply of homes and ease pressure in the market. Additionally, job and wage gains, along with increased inventory, are expected to positively impact the market in the coming years.