Why Home Sales are Sluggish

HOUSTON – (By Dale King, Realty News Report) – People who’ve been looking to buy a home this year as well as many of those in the business of selling residential properties would probably agree the market moved slowly during most of 2024.

Real estate brokerage Redfin put that snail’s pace theory to the test and discovered that on average, just 25 out of every 1,000 U.S. homes changed hands during the first eight months of 2024 — the lowest turnover rate in at least 30 years, says a recent report from the Seattle-based realty company.

Redfin says it conducted an analysis of housing turnover by comparing the first eight months of 2024 across different metro areas, home and neighborhood types. The company used turnover as a measure of housing availability since it indicates how often homes are sold in a given area.

Redfin’s analysis used data gathered from between 2012 and 2024. The study found that existing home sales this year were similar to those in the early- to mid-1990s, but the number of homes that existed then was much smaller — meaning the turnover rate was higher.

In total, the realty firm found that 37.5 percent fewer homes sold this year than the sales pace during the middle of the pandemic buying frenzy in 2021 (40 of every 1,000) and 31 percent fewer homes sold than during the last pre-pandemic year of 2019 (36 of every 1,000).

Even though mortgage rates fell from their 2024 peak, the nation has not a significant increase in the number of homes changing hands,” said Redfin Senior Economist Elijah de la Campa. “Of the homes listed this year, many have gone stale because of the lack of demand—especially residences which needed a little extra work.”

“With the majority of homeowners locked into low mortgages, rates will need to keep falling consistently for many to feel comfortable moving on from the deals they secured years ago,” he said.

However, in October mortgage rated trended upward.

The new Freddie Mac mortgage survey showing the 30-year fixed-rate mortgage averaged 6.72 percent for the week ending Oct. 31 – the fifth week in a row for mortgage increases.

The 30-year mortgage average of 6.72 percent as of October 31 was up from the previous week when it averaged 6.54 percent. A year ago at this time, the average was 7.76 percent.

Homes were sold this year at historically low rates for a number of interconnected reasons, said Redfin, among them:

Elevated mortgage rates: More than three-quarters of mortgaged U.S. homeowners have a rate under 5 percent, well below those offered this year, which peaked at 7.52 percent in April. This has prompted many homeowners to hold off on selling and buying another home using a higher rate, a phenomenon known as the “lock-in effect.”
Rising prices and low supply: U.S. home prices have hit record highs this year, with just enough buyer demand to keep prices consistently ticking up.
Economic and political uncertainty: Many buyers and sellers have taken a wait-and-see approach this year amid talk of a possible recession and ahead of a closely fought U.S. Presidential election between two candidates with contrasting economic and housing policies.

A number of Sun Belt cities and metros adjacent to New York led the list of major metros with the highest turnover rate, based on Redfin’s analysis of the 50 most-populous metros in the U.S.

Phoenix saw the largest turnover of the major metros, with 38 out of every 1,000 homes changing hands. It was followed by Newark (37 of every 1,000), Nashville (36 of every 1,000) and Tampa (35 of every 1,000).

The only Texas city that made the top 10 was Austin, where 29.9 of every 1,000 homes were sold during the first eight months of this year.

Redfin said every metro area saw at least 10 percent fewer homes change hands this year compared to 2019, but San Jose recorded the smallest drop (-13.7 percent), followed by San Francisco (-18.1 percent) and Detroit (-14.6 percent), which also jumped to 10^th on the list of major metros with the highest turnover.

Around 25 out of every 1,000 single-family homes and condos/townhouses in suburban and rural areas sold in the first eight months of the year, a slightly higher clip than the roughly 24 out of every 1,000 homes which changed hands in urban areas.

Since 2019, Redfin’s report says, the turnover rate for single-family homes in suburban and rural areas dropped 32.9 percent while condos and townhouses dropped 37.6 percent. By comparison, the turnover rate for single-family homes in urban areas dropped 25.8 percent while the rate for condos/townhouses fell 35.2 percent.

Hope for the Future

A new report from the National Association of Realtors shows that pending homes sales – an indicator of future activity – trended upward in September.

Lawrence Yun - NAR Chief Economist — NAR Chief Economist Lawrence Yun. Photo credit Ralph Bivins, Realty News Report.

In the next two years, NAR Chief Economist Lawrence Yun foresees slower home price appreciation and corresponding increases in sales.

“After two years of sluggish home sales in 2023 and 2024, existing-home sales are forecasted to rise to 4.47 million in 2025 and more than 5 million in 2026,” Yun said. “During the next two years, expect a slower rate of growth in home prices that’s roughly in line with the consumer price index because of additional supply reaching the market.”

Yun predicts the median existing-home price will rise to $410,700 in 2025 and to $420,000 in 2026. The annual 30-year fixed mortgage rate will slide to 5.9% in 2025 but then move higher to 6.1% in 2026.

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