The year 2024 has proven to be tumultuous for the U.Shousing market, as it continues to grapple with an entrenched downturnAs new statistics reveal, the sales of existing homes have dipped to a level not seen in almost three decades, marking a steady decline that has persisted for over two yearsThis stagnation is influenced by several key factors, including elevated mortgage rates, soaring property prices, and an acute scarcity of available homes, which leave many potential buyers in a state of uncertain limbo on the sidelines of the market, unable to take the crucial steps toward home ownership.

The National Association of Realtors (NAR) released its latest data on a Friday, showcasing the stark realities of the current landscape

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For the entirety of 2024, it was reported that the total sales of existing homes in the United States amounted to only 4.06 million units, reflecting a marginal decline of 0.7% from the year priorThis figure represents the bleakest performance since 1995, and it underscores an alarming stagnation, as it aligns closely with last year's disappointing resultsIn what can be seen as a paradox, the report revealed that despite the sales slump, the median price of existing homes escalated by 4.7% throughout 2024 to a record high of $407,500. This relentless increase in home prices amid declining sales emphasizes the growing chasm between supply and demand within the market.

Investigating the roots of this malaise leads us back to the year 2022, when the trajectory of the housing market was irrevocably altered

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As the pandemic brought forth a wave of refinancing and a historic drop in interest rates, the subsequent rise in mortgage rates abruptly transformed the pictureAccording to data from Freddie Mac, in October 2023, the average rate for a 30-year fixed mortgage experienced a meteoric rise, nearing the 8% mark—its highest point in nearly 23 yearsDespite temporarily dropping to a two-year low of around 7% in September 2023, the rates remained stubbornly above this threshold for the majority of the yearThis elevated borrowing cost, compounded by years of relentless price appreciation, has significantly eroded the purchasing power of prospective buyersIndividuals who once aspired to home ownership find themselves reevaluating their plans, with many ultimately being forced to abandon the idea altogether given the overwhelming burden of prospective mortgage payments.

Moreover, the dire shortage of homes available for sale has exacerbated the situation

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A lack of inventory not only failed to alleviate the pressures on rising home prices but has instead functioned as a strong underpinning, allowing prices to remain elevatedBy the end of December 2024, the inventory in the U.Shousing market dwindled to a meager 1.15 million homes, compared to a historical monthly average of approximately 2.25 millionAccording to current sales velocity, the existing stock can only sustain sales for roughly 3.3 months, a stark contrast to the balanced market norm of 4 to 6 months of inventoryIn this challenging environment, both buyers and sellers find themselves stuck in a dilemmaBuyers are caught between the fear of overpaying for a property only to see its value drop, while struggling to find homes that meet their criteria at reasonable pricesOn the flip side, sellers face challenges in finding suitable replacements if they sell their existing homes or worry that in a high-interest rate environment, they might be unable to afford a new home, resulting in a preference to hold onto their properties.

Despite an overwhelmingly grim outlook, a glimmer of hope emerged in December 2024, as the sales data reflected a mild upturn in the secondhand home market

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Following seasonal adjustments, December saw a month-over-month sales increase of 2.2%, driving the annualized sales pace to 4.24 million unitsThis marked the third consecutive month of sales growth—surpassing the previously forecasted target of 4.2 million units by analystsMoreover, the year-on-year sales volume in December soared by 9.3%. Notably, the median price for existing homes in December reached $404,000, reflecting a year-over-year increase of 6%. This surge in price also marked the 18th consecutive month of price appreciationSuch positive indicators suggest that the U.Ssecondhand home market may be slowly beginning its journey toward recovery.

Nevertheless, the future trajectory of the market remains shrouded in uncertainty

While recent fluctuations in mortgage rates have provided some relief, they continue to hover at elevated levels, presenting ongoing obstacles for buyers attempting to manage their purchasing costs and influence overall market demandAdditionally, the incessant rise in property prices renders affordability a significant issue that constrains market growthAlthough the data from December seems encouraging, for a full-fledged recovery to materialize, it is imperative to address numerous underlying issues, such as increasing home inventory, stabilizing property prices, and suitable adjustments to interest rate policiesAs we look ahead, it remains to be seen how the U.Ssecondhand home market will evolve—whether it will continue on the path toward recovery and prosperity or sink back into the depths of turmoil is still up for debate and requires careful observation of market dynamics.