Despite higher mortgage rates and elevated home prices, existing home sales jumped to a 10-month high in December, marking three monthly gains in annual growth, according to the National Association of Realtors (NAR). However, existing home sales end 2024 at 4.06 million, the lowest level since 1995 as the median price reached a record high of $407,500 in 2024.
While inventory improves and the Fed continues lowering rates, the market faces headwinds as mortgage rates are expected to stay above 6% for longer due to an anticipated slower easing pace in 2025. The prolonged rates may continue to discourage homeowners from trading existing mortgages for new ones with higher rates, keeping supply tight and prices elevated. As such, sales are likely to remain limited in the coming months due to elevated mortgage rates and home prices.
Total existing home sales, including single-family homes, townhomes, condominiums, and co-ops, rose 2.2% to a seasonally adjusted annual rate of 4.24 million in December, the highest level since February 2024. On a year-over-year basis, sales were 9.3% higher than a year ago, the largest annual gain since June 2021. However, total sales in 2024 fell to 4.06 million, breaking below 2023’s record low of 4.10 million and marking the lowest annual level since 1995.
The first-time buyer share rose to 31% in December, up from 30% in November and 29% in December 2023.
The existing home inventory level fell from 1.33 million in November to 1.15 million units in December but is up 16.2% from a year ago. At the current sales rate, December unsold inventory sits at a 3.3-months’ supply, down from 3.8-months last month but up from 3.1-months a year ago. This inventory level remains low compared to balanced market conditions (4.5 to 6 months’ supply) and illustrates the long-run need for more home construction.
Homes stayed on the market for an average of 35 days in December, up from 32 days in November and 29 days in December 2023.
The December all-cash sales share was 28% of transactions, up from 25% in November 2024 but down from 29% in December 2023. All-cash buyers are less affected by changes in interest rates.
The December median sales price of all existing homes was $404,400, up 6.0% from last year. This marked the 18th consecutive month of year-over-year increases. The median condominium/co-op price in December was up 4.5% from a year ago at $359,000. This rate of price growth will slow as inventory increases.
Geographically, three of the four regions saw an increase in existing home sales in December, ranging from 2.6% in the West to 3.9% in the Northeast. Sales in the Midwest fell 1%. On a year-over-year basis, sales grew in all four regions, ranging from 6.5% in the Midwest to 12.9% in the West.
The Pending Home Sales Index (PHSI) is a forward-looking indicator based on signed contracts. The PHSI rose from 77.3 to 79.0 in November due to improved inventory. This marks the highest level since February 2023. On a year-over-year basis, pending sales were 6.9% higher than a year ago per National Association of Realtors data.
Discover more from Eye On Housing
Subscribe to get the latest posts sent to your email.
