The housing market at the end of 2024 paints a complex picture, marked by both hopeful signs of increased inventory and persistent challenges that are causing stagnation. Though the supply of homes has indeed seen a notable rise—an increase of 12.1% in active listings year-over-year, reaching levels not seen since 2020—this bounty comes with a caveat: a substantial portion of these homes are not selling. In fact, more than half of the homes on the market by November of this year had languished there for at least 60 days, indicating a significant disconnect between seller expectations and buyer demand.
The stark reality is that while inventory levels are rising, the quality and condition of many homes on the market are questionable. More than 54% of homes had been unsold for at least two months, marking the highest percentage since 2019 and demonstrating a 50% increase in stale listings from the previous year. Redfin agent Meme Loggins aptly points out that homes that are either priced improperly or in poor condition are likely to stay on the market far longer than desirable. Interestingly, homes that are competitively priced and well-maintained are seeing a markedly different experience, with such listings disappearing from the market within a mere three to five days. This divergence highlights the necessity for sellers to align their expectations with current market realities.
One of the primary factors stunting the housing market is the elevated mortgage rates, which climbed above the 7% mark in October and have remained steadfastly high. This inflation in borrowing costs is putting a damper on buyer enthusiasm, despite the rise in home prices—up 3.6% on average in October compared to a year prior. As a result, potential homebuyers are approaching the market with caution, recalibrating their expectations in light of these new financial parameters. Buyers are showing a willingness to negotiate, indicating a shift towards a more balanced market, albeit one fraught with challenges stemming from persistent financial constraints.
Amidst this backdrop, pending home sales—a key indicator of future transactions—rose in November to the highest point in nearly two years. However, it’s essential to understand that this increase is from a low baseline, suggesting that while there is demand, it exists within a context of hardship. Lawrence Yun, the chief economist for the National Association of Realtors, attributes this uptick in signed contracts to buyers’ efforts to leverage a more favorable inventory situation. Yet, the continual rise in mortgage rates has led to a recalibrated sense of what is achievable, with lingering apprehension about future rate changes weighing heavily on prospective buyers.
The ‘seller lock-in effect’—a phenomenon where homeowners hesitate to sell if it means sacrificing their low mortgage rates—was expected to influence the market heavily. Yet, CoreLogic’s year-end report suggests that some alleviation has occurred, albeit mostly due to life circumstances prompting sales. Although more inventory has become available, it has done little to stimulate meaningful sales growth, indicating that homeowners are largely still reluctant to make a move under current financial pressures. High home prices, coupled with rising costs associated with transferring ownership such as broker fees and moving expenses, have created a situation where many potential buyers are begrudgingly choosing to remain in rental situations.
As the year wraps up, the housing market is grappling with increasing inventory juxtaposed against the baggage of elevated prices and rates. Buyers face an uphill battle as affordability remains out of reach for many, pushing them to delay homeownership. The outlook for 2025 hinges on an unpredictable economic climate; whether home prices will stabilize, mortgage rates will decline, or whether inventory will continue to shift remains to be seen. For now, as we conclude 2024, both buyers and sellers must navigate a market that is rich in potential yet fraught with complexities, necessitating a careful and informed approach.