This is Why Sales are Slow & Likely to Stay That Way for a Long Time

[Terrel L. Shields]

House prices need to fall or wages need to rise - as we are, it's a sort of checkmate with the options either leading to recession or inflation...or both.

 

[Tom D]

Sales of existing homes in the US fell last year to the lowest level in almost three decades, as sky-high home prices and elevated mortgage rates squeezed home buyers.

Sales of previously owned homes, which make up the vast majority of the market, totaled 4.06 million in 2024, the National Association of Realtors said Friday. That’s the lowest level since 1995 and slightly below 2023’s similarly anemic levels.

 

[J Grant]

sales will stay slow unless a major price correction occurs

The combination of low inventory due to people hanging on to houses with 3.5 % financed mortgages and higher prices that have come down a bit but not enough to matter, with soaring insurance costs and hither RE taxes are pricing many of of the market. I see more and more LLC buyers and cash sales.

Sad . One more way a path to financial freedom and the AMerican dream is eroding.

 

[Joe Flacco]

We have seen periods like this before.

 

[Joe Flacco]

Or you can look at it like this.

Between 1940 and 1980 when rates were in a uptrend, the annual income needed to buy a house increased 1,875% over 40 years.
Between 1980 and 2020 when rates were in a downtrend, the annual income needed to buy a house increased 300% over 40 years.

 

[Joe Flacco]

We'll see what happens but it is not impossible that history repeats itself.

Trump policies are inflationary for both goods and wages in the US. But at the same time we have deflationary pressure on wages from tech.

Bond market is saying we are in an environment more similar to 1940-1980 than 1980-2020.

 

[Charles West]

Here is an article from this morning's Journal. A ray of hope is the bond market will likely respond favorably to any kind of effort to reduce Federal expenditure bloat.

U.S. Homes Sales in 2024 Fell to Lowest Level in Nearly 30 Years​

Higher mortgages rates and record home prices kept sales subdued for the second straight year​

By

Nicole Friedman
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Updated Jan. 24, 2025, 10:14 am ET


U.S. existing-home sales fell in 2024 to the lowest level since 1995, the second straight year of anemic sales due to stubbornly high mortgage rates.

High costs related to homeownership sapped sales again. The average rate for a 30-year fixed mortgage has hovered between 6% and 8% since late 2022, making it prohibitively expensive for many Americans to buy homes at current prices, which hit record highs last year. Rising home insurance and property tax costs are also adding to homeowners’ expenses.

The housing market’s outlook this year depends again on mortgage rates, said Rick Palacios Jr., director of research at John Burns Research & Consulting.

“The starting point for 2025 is, you’re kind of already starting in a spot with not that much momentum,” he said. “I don’t really see how that thesis reverses and gets more optimistic as long as mortgage rates stay at 7%.”

The Federal Reserve cut short-term rates three times last year, but mortgage rates have risen in recent months. Last week, mortgage rates topped 7%, an important psychological threshold for buyers and sellers, though rates declined slightly this week, according to Freddie Mac.

The unaffordable housing market has frustrated buyers and sellers, forcing many to delay or cancel plans to move, and prompted both presidential candidates in 2024 to pledge to help lower housing costs. The slow pace of sales has also hurt mortgage lenders, real-estate brokerages and home-goods stores.

The unaffordable housing market has frustrated buyers and sellers. Photo: Agence France-Presse/Getty Image
Existing-home sales fell 0.7% in 2024 from the prior year to 4.06 million, the National Association of Realtors said Friday.

That marked the second straight year that sales of previously owned homes stood at the lowest level since 1995, when the national population was significantly smaller. The number of sales is also down about a third from the more than six million homes that sold in 2021, when the market was booming due to low mortgage rates and pent-up demand after the first year of the pandemic.

Home prices have continued rising on a year-over-year basis, because the inventory of homes for sale is lower than historically normal levels. Inventory is up from year-ago levels, but supply is still tight in many markets because many would-be sellers with low mortgage rates are unwilling to sell and take on a higher rate to buy a different home.

The national median existing-home price in December was $404,400. That is down from the record high of $426,900 reached in June but represents a 6% increase from December 2023, NAR said.

“How is it that home sales are so low while home prices are so high?” said Lawrence Yun, NAR’s chief economist. “Inventory appears to be a big factor driving sales.”

Heather and David Baxter weren’t deterred by current mortgage rates and decided to buy a house in Morgantown, W.VA. Photo: Heather Baxter

Heather and David Baxter decided to buy a four-bedroom house in Morgantown, W.VA., despite current mortgage rates. Their purchase is set to close Friday, and they are paying extra to reduce their mortgage rate to 6.5%.

“My worry was that eventually the interest rates will fall, and the market is going to start going way up,” Heather Baxter said. “I figured now would be a better time, because even though my interest rate is higher, I know that we can always refinance” if rates go down in the future.

Nationally, there were 1.15 million homes for sale or under contract at the end of December. That was down 13.5% from November and up 16.2% from December 2023.

“Inventory is increasing—that brings people into the market,” said Leo Pareja, chief executive of brokerage eXp Realty. “We think that existing-home sales will marginally increase” in 2025, he said.

On a monthly basis, existing-home sales rose 2.2% in December from the prior month to a seasonally adjusted annual rate of 4.24 million, the highest level since February 2024, NAR said. Economists surveyed by The Wall Street Journal had estimated a monthly increase of 1.2%.


December sales rose 9.3% from a year earlier.

News Corp, owner of the Journal, also operates Realtor.com under license from NAR.



Write to Nicole Friedman at nicole.friedman@wsj.com

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