As 2024 draws to a close, the housing market presents a mixed picture. While there’s a noticeable increase in the number of homes available for sale, a significant portion of this inventory remains unsold, sitting on the market for longer periods than usual. This combination of more homes available but slower sales is creating a unique and challenging environment for both buyers and sellers.
A Surge in Housing Inventory
November 2024 saw a 12.1% increase in active listings compared to the same month in 2023, marking the highest level of inventory since 2020. This surge in available homes brings some positive news, as it indicates that sellers are eager to capitalize on the relatively stable market conditions. However, despite the uptick in supply, a closer look at the data reveals a troubling trend: many of these homes are not moving quickly off the market.
According to the latest report from Redfin, over half of the active listings (54.5%) had been on the market for 60 days or longer without securing a sale. This marks the highest proportion of stale listings for a November since 2019, and the number is up nearly 50% compared to the previous year. While this inventory increase may seem promising at first glance, the reality is that the homes available are not necessarily the ones that are in demand.
Homes Take Longer to Sell
The typical time it takes for a home to go under contract in November 2024 was 43 days, according to Redfin. This represents the slowest pace for this month in five years. While homes that are well-priced and in good condition are still selling quickly—often in as little as three to five days—those that are overpriced or in poor condition are languishing on the market. This slow pace of sales is indicative of a shift in the housing market, where buyers are more discerning and unwilling to make quick decisions, especially given the elevated mortgage rates.
Meme Loggins, a Redfin agent, highlighted the reality of the current market, stating that “a lot of listings on the market are either stale or uninhabitable.” She explained that homes that are fairly priced and in good condition tend to sell quickly, while overpriced homes often sit unsold for months. This scenario is creating a standoff between sellers who are unwilling to adjust their asking prices and buyers who are looking for more value.
Mortgage Rates Continue to Impact the Market
One of the primary factors contributing to the stagnation in the housing market is the persistent high mortgage rates. In October 2024, mortgage rates shot past 7%, and they have largely remained elevated throughout the remainder of the year. This represents a significant challenge for homebuyers, particularly those looking to purchase their first home or move up the property ladder. The combination of higher mortgage rates and rising home prices has created a financial strain that many buyers are struggling to overcome.
The latest S&P CoreLogic Case-Shiller home price index reveals that home prices continued to rise in October, increasing by 3.6% compared to the same month in 2023. While this indicates a degree of stability in home prices, it also means that buyers are facing increased financial pressure. The combination of higher home prices and mortgage rates is pushing the overall cost of homeownership to levels not seen in decades, making it difficult for many to afford a new home.
Buyers Adjust to the New Normal
Despite the challenges posed by rising mortgage rates, there is still demand in the housing market. According to the National Association of Realtors (NAR), pending home sales in November showed positive growth, both on a monthly and annual basis. This indicates that buyers are still active, but they are adjusting their expectations in response to the current market conditions.
Lawrence Yun, NAR’s chief economist, explained that “Consumers appeared to have recalibrated expectations regarding mortgage rates and are taking advantage of more available inventory.” Buyers, he noted, are no longer waiting for mortgage rates to fall substantially, and many are taking advantage of the increased supply of homes. The shift in market dynamics has also empowered buyers, who are finding themselves in a better position to negotiate as the market moves away from being a seller’s market.
This adjustment in buyer behavior has been largely driven by the reality of the current mortgage environment, where rates have been above 6% for the past two years. With no significant reduction in rates expected in the near future, many buyers have opted to move forward with their plans despite the higher costs associated with financing a home.
Sellers Face Obstacles as the Market Shifts
While buyers are becoming more adaptable, sellers are facing increasing difficulty in moving their properties. The phenomenon known as the “seller lock-in effect,” where homeowners with low mortgage rates are reluctant to sell and give up their favorable financing terms, had previously contributed to a supply shortage in the housing market. However, by the end of 2024, this effect began to ease as more sellers opted to list their homes due to life events or the need to access accumulated equity.
Even with the added inventory, sales volumes have remained relatively flat due to the ongoing challenges posed by higher mortgage rates and home prices. The higher cost of owning a home, particularly when adjusted for inflation, has created a barrier for many potential buyers. As Selma Hepp, Chief Economist at CoreLogic, noted, “The cost of owning a home now, when adjusted for inflation, is at its highest point in decades.” This increase in housing costs has made it even more challenging for first-time buyers and those looking to trade up to find affordable options.
Looking Ahead: What 2025 Holds for the Housing Market
As we move into 2025, the outlook for the housing market remains uncertain. While more homes are expected to become available, the high mortgage rates and rising home prices are likely to continue to stymie sales. Buyers will need to contend with higher financing costs, and sellers will have to navigate a more competitive market where well-priced, well-maintained homes are the only ones that are likely to sell quickly.
For the time being, the housing market appears to be in a state of flux, with inventory levels rising but sales slowing. The challenges faced by both buyers and sellers are a reflection of the broader economic environment, where interest rates and inflationary pressures are weighing on consumer spending. The key to navigating this market will be adaptability—buyers must adjust to the new normal of higher mortgage rates, while sellers must be willing to price their homes competitively to attract offers.
In conclusion, while the end of 2024 brings more inventory to the housing market, the pace of sales remains sluggish due to elevated mortgage rates and rising home prices. As we move into 2025, the market will continue to be shaped by these factors, with both buyers and sellers facing a range of challenges. Adaptability will be crucial for those looking to buy or sell in the coming year, as the market’s slow-moving nature is likely to persist.
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