Home Sales Had Their Worst Year Since 1995. There May Be a Silver Lining.

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There were fewer homes sold by previous owners last year than in any year since the mid-1990s. Unpredictable mortgage rates and high property prices may have discouraged many families from moving.

The National Association of Realtors' chief economist noted on Friday that there are increasingly favorable market conditions.

In 2024, a total of 4.06 million existing homes were sold, according to the National Association of Realtors. That's fewer homes than the 4.09 million sold in 2023, which was the lowest annual sales figure since 1995. The median price of a home for sale was $407,500, which is a 4.7% increase from the previous year.

The full year sales figure comes despite a minor pickup in sales in December. In the last month of the year, existing homes sold at a seasonally adjusted annual rate of 4.24 million, the fastest pace since February and more than the 4.2 million economists forecasted by FactSet had expected. The median home price in December was $404,400, a 6% increase from one year earlier.

Home sales picked up in the later months of the year, even with higher interest rates on mortgages," Lawrence Yun, the trade group's chief economist, said in a statement. "As is usual, home sales tend to be slower during the winter than during spring and summer, but we're seeing a trend now where sales have increased for three months in a row compared to the same time last year.

People who have fallen short of receiving the pandemic's significant home equity increases.

Mortgage rates in 2024 stayed over 6%, based on weekly data from Freddie Mac. Rates dropped as low as 6.08% in September before rising to finish the year at 6.85%.

There are some promising signs for potential buyers waiting in the wings. “I don’t see home sales remaining this low in 2025,” Yun said during a call with reporters.

No, mortgage rates have not declined. In fact, the average fixed 30-year mortgage rate reached as high as 7% for a brief period earlier this month, before dropping to 6.96% this week, according to Freddie Mac.

There haven't been widespread price reductions, at least not on a national scale. During the four weeks that ended on January 19, Redfin's home price gauge was roughly 5% higher than it was one year ago.

A positive development is the increase in the number of homes for sale. By the end of December, there were 1.15 million existing homes listed for purchase, down from the previous month but significantly higher than a year ago, representing a 16.2% increase. More homes on the market provide buyers with more choices and reduce the chances of a high-stakes bidding war, which can inflate prices. “The most important factor in this real estate cycle appears to be the inventory number,” Yun said.

A strong job market contributes positively to the outlook for home sales this year, Yun added. The group stated in December that it predicts existing-home sales to increase between 7% and 12% in 2025, with mortgage rates around 6%.

Other industry forecasters also predict a sales increase, although not to the same extent. Fannie Mae projects that existing-home sales will increase by 2.3% in 2025, while the Mortgage Bankers Association anticipates sales rising by 5.3%.

shaina.mishkin@dowjones.com