The housing market in the United States is currently facing unprecedented challenges, with existing home sales in 2024 plummeting to the lowest levels seen in nearly three decades. As the founder and managing partner of The Connor Group, a real estate investment firm, the discussion around what needs to happen to revitalize this market is more critical than ever. The impact of regulations, particularly in states like California that have been ravaged by wildfires, adds another layer of complexity to the housing landscape.
According to the National Association of Realtors (NAR), existing home sales fell to an annual rate of 4.06 million in 2024, marking the lowest figure since 1995. This decline has occurred alongside a surge in home prices, which reached a staggering median of $407,500. The combination of high prices and elevated mortgage rates—hovering around 7%—has created a challenging environment for potential homebuyers. Alice Zheng, an economist at Citigroup, notes that the current sentiment surrounding homebuying is generally soft, suggesting that any strength in existing home sales is unlikely to be sustained in the near term.
Despite the overall downturn, there were signs of recovery in the latter months of 2024. Existing home sales showed a modest increase of 2.2% from November to December, reaching a seasonally adjusted annual rate of 4.24 million. This uptick was bolstered by a year-over-year increase of 9.3% compared to December 2023. Lawrence Yun, NAR’s chief economist, highlighted that the final months of the year typically see softer sales, yet the recent momentum indicates a growing consumer understanding of the long-term benefits of homeownership. Factors such as job and wage gains, coupled with an increase in inventory, are contributing positively to the market.
The NAR’s analysis revealed that existing home sales increased across all four major regions of the U.S., with prices also rising in each area. Notably, the largest gains were observed in transactions involving homes valued over $500,000, while sales for properties priced under $250,000 experienced a decline. The median home price for existing homes rose to $404,400, reflecting a 6% increase from the previous year. This price elevation is partly attributed to the stronger performance of the upper-end market, which saw a remarkable 35% increase in sales for homes priced above $1 million.
First-time homebuyers are gradually making their presence felt in the market, accounting for 31% of home sales in December, up from 30% in November. However, the overall share of first-time buyers remains concerningly low, with NAR’s “Profile of Home Buyers and Sellers” indicating that only 24% of buyers were first-timers, the lowest figure ever recorded. This trend underscores the challenges faced by new entrants in a market characterized by high prices and rising interest rates.
The regulatory environment plays a significant role in shaping the housing market, particularly in states like California, which are grappling with the aftermath of devastating wildfires. The Connor Group founder emphasizes the need for streamlined regulations to facilitate rebuilding efforts and encourage new construction. The complexities of zoning laws, building codes, and environmental regulations can hinder the timely restoration of housing stock, exacerbating the existing supply-demand imbalance.
As we move into 2025, the housing market’s trajectory remains uncertain. While there are signs of recovery, the overarching challenges of high mortgage rates and elevated home prices continue to loom large. The interplay between consumer sentiment, regulatory frameworks, and economic conditions will be crucial in determining the market’s direction.
