In 2024, U.S. home sales fell to their lowest level since 1995, with only 4.06 million existing homes, including single-family houses, condos, and townhouses sold, according to the National Association of Realtors (NAR). Experts attribute this slowdown to persistently high mortgage rates and a limited housing inventory, both of which have contributed to record-high home prices. The median home price reached $407,500 in 2024, further straining affordability, especially for millennials who are entering their prime home-buying years.
Despite the Federal Reserve cutting interest rates three times last year and planning two additional cuts in 2025, mortgage rates have remained stubbornly high, averaging around 7% for a 30-year loan. Many homeowners who secured much lower rates of 2-3% before 2022 are reluctant to sell, further limiting the supply of available homes. Experts suggest this lack of movement in the market has created a situation where supply is unable to meet demand, describing it as a "market failure."
By the end of 2024, total housing inventory rose to 1.15 million units, a 16% increase from the previous year. However, the market still falls short by approximately 3 million units needed to achieve a balanced, healthy market. Analysts warn that sluggish home sales will likely persist in the coming year with interest rates expected to stay elevated and builders hesitant to invest in new developments due to affordability concerns. Builders remain cautious, as high costs and low affordability deter potential buyers from entering the market despite strong demand.
Experts anticipate that the housing market will continue facing challenges unless there is significant intervention, such as more aggressive interest rate cuts or policy changes to incentivize new construction and improve affordability.
4 comments:
Will policies aimed at motivating new construction or encouraging homeowners to sell could help with market failure or is it really just come down to interest rates and inflation?
Although a home shortage is evident I would be interested to see the historical hourly wages and disposable income of Americans in the past decades to see how the homeownership rates are correlated in periods of otherwise normal interest and unemployment rates.
With trump in office and him promising to deport illegal immigrants do you think a home shortage and prices increasing because illegal immigrants in Constuction are around 13% of the workforce?
This makes me really curious. I feel like I hear of new things to help with construction speeds all the time. I heard they came out with a way to "3D" print a house with some some sort of foam. I am going to hope that supply of homes increases soon so I can buy a house without taking out a crazy 30 year loan or going bankrupt. The last thing I want to do is waste money renting a place for the next 5 years of my life.
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