U.S. existing home sales in 2024 hit the lowest level since 1995, declining for three consecutive years

On Friday, according to data from the National Association of Realtors (NAR), U.S. existing home sales in December exceeded expectations, rising for the third consecutive month, marking the longest duration of continuous increases since late 2021, indicating that homebuyers are beginning to accept mortgage rates above 6%.

In specific data, the total annualized existing home sales in the U.S. for December reached 4.24 million units, the highest level since February of last year, with expectations of 4.2 million units and a previous value of 4.15 million units in November. Existing home sales in December increased by 2.2% month-on-month, marking the third consecutive month of growth, with an expected increase of 1.2% and a previous value of 4.8% in November. The unadjusted year-on-year existing home sales in December increased by 10.8%.

However, the total existing home sales in the U.S. for the entire year of 2024 are still expected to record the worst performance since 1995, a year when the U.S. population was about 70 million less than it is now. This also marks the third consecutive year of decline in existing home sales in the U.S., a situation that has only occurred during the 2006 real estate crisis and the economic recessions in the early 1980s and early 1990s.

In recent years, the U.S. existing home market has seen sluggish sales. A major reason is the so-called lock-in effect, where homeowners are reluctant to list their homes for sale and give up lower mortgage rates. Despite the rebound in existing home sales in December, the U.S. real estate market remains in a predicament due to high mortgage rates and limited inventory.

After several months of slow increases, the existing home inventory in December decreased by 13.5% compared to November, which is typical at the end of the year. However, compared to December 2023, the existing home inventory still increased by 16.2%.

The tight inventory has kept home prices high, making the current U.S. housing market one of the least affordable in history. The median existing home price in December increased by 6% year-on-year, reaching $404,400. Sales activity in the high-end market has increased, driving home prices to new highs for the year.

Regionally, three out of the four regions in the U.S. saw an increase in existing home sales, with the Northeast leading the way with an increase of nearly 4%.

Existing home sales account for about 90% of the sales volume in the U.S. real estate market, calculated at the time of closing. Contracts are typically signed one or two months before closing, so the sales data for December primarily reflects purchasing decisions made in November and October.

The market originally hoped that 2024 would be a turning point for the U.S. housing market as the Federal Reserve began to cut interest rates. However, due to persistent inflation, concerns have arisen about the Fed easing its policies too early. Although the Fed has cumulatively lowered the benchmark interest rate by one percentage point since last September, U.S. Treasury yields still rose significantly by nearly one percentage point late last year Mortgage loan rates are closely related to U.S. Treasury yields, and the high levels of U.S. Treasury yields keep mortgage loan rates elevated. After briefly falling to an 18-month low in September, mortgage loan rates have climbed back up and are currently twice the level at the end of 2021.

Investors expect that Trump's policies will struggle to cool inflation, keeping U.S. Treasury yields high. According to some industry insiders, mortgage loan rates are expected to remain above 6% on average until at least 2027.

The Federal Reserve will hold its January FOMC meeting again next week, where it is expected to keep interest rates unchanged.

NAR Chief Economist Lawrence Yun stated:

Despite high mortgage loan rates, home sales in the last few months of last year showed a steady recovery.

NAR data also shows:

• 53% of sold existing homes were on the market for less than a month, unchanged from November. The average listing time for properties is 35 days, compared to 32 days in November.
• 16% of existing homes sold for more than the listing price.
• Individual investors or buyers of second homes purchased 16% of existing homes, up from 13% in November.
• First-time homebuyers accounted for 31%, with NAR stating that this proportion for the entire year was 24%, the lowest on record. Historically, first-time homebuyers typically make up about 40% of the market, indicating that many Americans are being squeezed out of the market due to affordability challenges.
• All-cash transactions accounted for 28% of sales.
• Sales of single-family homes increased by 1.9% in December, while purchases of condominiums and co-ops also saw an increase. Both figures reached their highest levels since February of last year.

In addition to signs of stabilization in existing home sales, the U.S. new home market also seems to be stabilizing, bringing some initial optimism for the new year. Next Monday, the U.S. government will release December new home sales data, which is calculated based on signed contracts and is considered a leading indicator of the U.S. real estate market