Resilience in Home Prices Challenges Expectations Amidst Economic Uncertainty in 2024

In 2024, resilience in home prices and active inventory contrasts with low sales, prompting a reevaluation of housing market trends as we head into 2025.

Even I underestimated the market’s resilience.

Market Overview

As we look back on the housing landscape as of January 24, 2025, it’s clear that existing home sales wrapped up the past year on a strong note.

This trend aligns with insights from our ongoing Housing Market Tracker.

What’s more, home prices demonstrated unexpected strength towards the end of 2024, signaling a change that began in the summer and continued into the following year.

When we compare data from 2022 to 2023, there’s a noticeable upward trajectory in the numbers starting from October 2024.

Key Insights

To put things in perspective, it’s crucial to acknowledge that we are starting from historically low sales levels—especially when considering the fluctuations in the labor market.

In the early 1980s, home sales underwent a sharp decline, plummeting from four million to two million.

We can draw parallels to today’s housing situation, marked by rising home prices, a steep drop in sales, and a lack of significant price corrections.

However, it’s worth remembering that during that earlier period, housing demand picked up as mortgage rates fell amidst a recession.

While a similar recovery could happen now, mortgage rates have yet to drop sufficiently to catalyze a notable increase in home sales.

  • It’s typical for active inventory to decrease at this time of year, yet in 2024, it managed to stay above the one million mark.

    This is a small but encouraging sign, with the growth in active inventory standing out as a major highlight for the year.

  • Data starting in September revealed an upward trend in the median sales price year-over-year, reflecting patterns noted in our tracker and the new pending home price index.

    Given these findings, my previous prediction of a 2.33% increase in home prices for 2024 will likely require adjustment as we compile all relevant data.

Looking Ahead

It’s time to rethink the assumption that home prices are directly tied to sales volume, particularly in light of rising mortgage rates.

Historical data shows that significant declines in home prices generally occurred between 2007 and 2011, a time marked by high inventory levels and distressed sellers, with supply often exceeding ten months.

Today’s market paints a different picture; active inventory is around one million rather than the four million seen in 2007, and current monthly supply sits around 3.3 months—much tighter compared to the 10.8 months during the distressed sales of 2008.

As we transition into 2025, our weekly tracker has highlighted some recent dips, particularly as mortgage rates edge towards 7.25%.

However, in the weeks leading up to this moment, we did observe a rise in purchase applications, which gives us reason to remain optimistic.

We will keep a close eye on new weekly housing data to ensure you are up-to-date with real-time developments, allowing you to avoid relying on outdated figures.

Source: Housingwire