As 2024 draws to a close, the housing market presents a mixed bag of news. While it’s encouraging to note a significant uptick in supply—active listings were up by 12.1% in November 2024 compared to the same month the previous year, marking the highest level seen since 2020—this cannibalization of inventory comes with its own set of complications. According to a recent Redfin report, more than half of the properties listed, a staggering 54.5%, had languished on the market for at least 60 days without a buyer. This stagnation not only illustrates a disconnect between sellers’ expectations and buyer readiness but highlights the prevalence of ‘stale’ listings which are often either overpriced or in less-than-desirable condition.
The statistics paint a concerning picture: properties that did secure contracts were spending an average of 43 days on the market, a slower pace than has been observed in recent Novembers. This delay suggests not just a temporary cooling of buyer enthusiasm, but a structural issue in property pricing and market perception. Real estate agents, like Meme Loggins, have begun to emphasize the importance of competitive pricing, indicating that while reasonably priced homes can sell rapidly, those that are inflated in value can linger for months, leading to discouragement for both sellers and potential buyers alike.
Compounding these challenges is the ever-volatile nature of mortgage rates. Hitting above 7% in October, rates have remained elevated, entrenching a scenario where buyers are more likely to reconsider their options. According to Mortgage News Daily, such conditions are creating a pressure cooker effect, with potential homebuyers grappling with soaring home prices that continue to climb, albeit at a more modest rate of 3.6% annually as revealed in the latest S&P CoreLogic Case-Shiller index. This price inflation stalls many buyers who are already stretched thin by rising costs in other areas of living and transportation.
Brian Luke from S&P Dow Jones Indices notes that market stability could improve if buyers overcome their political uncertainties amid fluctuating economic conditions. However, this argument hinges on a significant pump of equity market optimism translating into housing. Thus far, the overall slow pace of sales leads us to question the sustainability of the current trend.
Despite these headwinds, there are signs of resilience within the market. Pending home sales—indicative of signed contracts to purchase existing homes—increased in November, achieving their highest volume in nearly two years. The National Association of Realtors has attributed this rise to buyer reassessment of expectations, suggesting that they are adjusting to the ‘new normal’ regarding mortgage rates, which have consistently averaged above 6% for two years.
Economist Lawrence Yun highlights that buyers’ willingness to adapt is empowering them to negotiate more favorable conditions as inventory levels increase. This newfound leverage represents an essential shift: no longer are buyers completely at the mercy of sellers, which could potentially lead to a more balanced market in the future.
However, the promising increase in pending home sales must be taken with caution. The slower pace of sales coupled with sustained high interest rates forecasts a laborious transition into 2025, particularly as renters remain in their current accommodations longer than usual. This trend is often tied to heightened living costs, pricing out potential buyers and prolonging their entry into homeownership.
There is a notion known as the ‘seller lock-in effect,’ where many property owners hesitate to exchange their lower mortgage rates for new loans at significantly higher rates. This effect seems to be dissipating slightly, but largely remains prominent in the market. This reluctance results in stagnated movement within the housing stock, drawing out sales processes and thereby complicating the market’s recovery.
While the 2024 housing market is rife with opportunities for discerning buyers and sellers willing to adapt, it also presents significant challenges. As we move into 2025, the focus will need to be on creating balanced conditions that foster genuine transactions while addressing the broader economic influences affecting home affordability and buyer confidence.