As we wrap up 2024, signals from the housing market present a mixed bag for buyers and sellers alike. On one hand, there has been a notable increase in housing supply, while on the other hand, much of this stock is languishing on the market. The situation raises several questions about pricing strategies, mortgage rates, and broader economic conditions influencing home sales.
According to a recent report from Redfin, active home listings soared by 12.1% in November compared to the same month in the previous year, marking a significant shift that has not been observed since 2020. However, this uptick in inventory is overshadowed by a troubling trend: more than half of these homes—approximately 54.5%—had been listed for over 60 days, indicating a disconnect between supply and demand. This is the highest percentage of unsold homes sitting on the market for at least two months that we’ve seen in November since 2019, and represents a nearly 50% increase from last year’s figures.
This situation raises concerns about market health. While having more inventory can be beneficial for prospective buyers, it also signifies that many sellers may be misjudging market conditions or pricing their homes inadequately. This mismatch creates a backlog of listings that doesn’t align with consumer interest. Redfin agent Meme Loggins expressed a crucial point: homes that are competitively priced and in good condition sell quickly, while overpriced properties stagnate on the market for extended periods, sometimes exceeding three months.
A crucial factor being scrutinized for its impact on the housing market is mortgage rates, which surged above 7% in October and remained high through the end of the year. Such elevated rates can discourage potential buyers, as the costs associated with borrowing have soared, diminishing affordability. As noted by Lawrence Yun, chief economist at the National Association of Realtors (NAR), consumers appear to have recalibrated their expectations—they are no longer waiting for rates to drop but are instead adapting to a new normal.
The rise in mortgage rates comes at a time when home prices are also climbing. The S&P CoreLogic Case-Shiller Index reported a 3.6% increase in property prices in October over the previous year. This combination of rising prices and high-interest rates can create a “double whammy” effect, making it increasingly difficult for buyers to enter the market. The comfortable pace of prior years has been replaced with heightened pressure, where renters are choosing to remain in their current situations due to financial constraints associated with purchasing a home.
Despite the challenges presented by high mortgage rates and elevated home prices, pending home sales have shown an uptick in both monthly and annual comparisons, reaching their highest levels in nearly two years according to NAR data. This statistic might suggest some resilience among buyers. However, it’s essential to note that these sales figures emerged from a very low baseline, indicating that while there is activity, it may not be robust enough to signal a sustained recovery in the housing sector.
Furthermore, the seller lock-in effect is beginning to ease as homeowners start to find themselves in need of moving due to life changes. This development could potentially lead to an increase in new listings in 2025, contributing to a potential stabilization of the market. However, whether this influx of homes will translate into sales remains uncertain, especially given the soaring costs of ownership, which, when adjusted for inflation, have reached heights not seen in decades.
The landscape for the housing market heading into 2025 remains uncertain. Increased supply could serve buyers well, but without a corresponding demand, many listings may sit unsold. Elevated mortgage rates along with rising home prices continue to haunt prospective homeowners, challenging their purchasing power and delaying their decisions. As sellers adjust their expectations and the market dynamics shift, all eyes will be on whether we can expect a gradual recovery or if the current stagnation will persist. Navigating this turbulent terrain requires careful consideration from both sellers and buyers as they respond to the fluctuating economic landscape.