In 2024, the U.S. housing market experienced a notable decline in home sales, reaching levels reminiscent of the mid-1990s. Existing-home sales in November rose to an annual rate of 4.15 million, the highest since March, yet still insufficient to surpass 2023's figures, which were the lowest since 1995.
In comparison, 2008—a year marked by the housing market crash—saw approximately 4.12 million existing-home sales. While both years reflect depressed housing activity, the underlying causes differ significantly.
Factors Contributing to Lower Home Sales in 2024
High Mortgage Rates: Mortgage rates fluctuated between 6% and 8% throughout 2024, rendering home financing more expensive and deterring potential buyers.
Limited Housing Inventory: Despite a 17.7% increase in unsold homes from the previous year, the market remained tight, with about 30% fewer homes available compared to pre-pandemic levels. This scarcity contributed to rising home prices, further impacting affordability.
Affordability Challenges: The combination of high mortgage rates and elevated home prices strained affordability, leading many potential buyers to delay or abandon their homeownership plans.
Economic Uncertainty: Broader economic concerns, including inflation and market volatility, influenced consumer confidence, causing hesitation in making significant financial commitments like purchasing a home.
Comparison with 2008
The 2008 housing crisis was primarily driven by an oversupply of homes, subprime mortgage lending, and a subsequent wave of foreclosures, leading to a market collapse. In contrast, the 2024 downturn is characterized by high mortgage rates and limited inventory, resulting in decreased affordability rather than a systemic financial crisis.
Outlook for 2025
Looking ahead, experts have mixed opinions on the potential for a housing correction in 2025. Some forecasts suggest a modest recovery, with existing-home sales projected to reach approximately 5.6 million by 2025.
Additionally, home prices are expected to increase slowly, with a 2% rise over 2024, bringing the median home price to around $410,700.
However, concerns remain regarding housing affordability and inventory shortages. While a significant market correction akin to 2008 is not anticipated, the ongoing challenges suggest that the housing market may continue to experience volatility. Therefore, stakeholders should remain vigilant and monitor economic indicators closely as 2025 approaches.
