Existing home sales ended the year on a positive note, which aligns with our weekly Housing Market Tracker data, but something surprising is that home prices firmed up late in the year as well. We observed a shift in the forward-looking data starting in the summer, which continued throughout the year.
Notably, we compared the data from 2022 and 2023 and noticed positive year-over-year data starting in October 2024, which you can see in the chart below.
Now, back to reality. As I have always stated, we are working from the lowest sales figures ever recorded in history — significantly lower when adjusted for the workforce. When existing home sales crashed in the early 1980s, they declined from 4 million to 2 million. There are similarities between the early 1980s and the current housing market: both periods experienced significant home price growth, a massive sales decline and no home price decreases.
However, housing demand surged when mortgage rates fell in the early 1980s during a recession. A similar situation could occur now, but we haven’t had mortgage rates low enough for long enough to increase home sales significantly.
A few key notes on the charts below
1. Active inventory typically decreases at this time of year, but in 2024 it did not drop below 1 million. I’m choosing to celebrate small victories when I can. For me, the highlight of 2024 was the growth in active inventory.
2. The median sales price data began to show improvement year-over-year in September, aligning with the trends indicated by our tracker and new pending home price index. As a result, my 2024 price forecast of 2.33% is likely to be incorrect when all the home price data groups are accumulated I will be too low.
What happened to the premise that home prices follow sales volume and that higher mortgage rates would lead to a price crash? Let me share the chart below with you all. Since 1942, the only time home prices significantly dropped was from 2007 to 2011, during a market characterized by much higher inventory, distressed sellers and a monthly supply exceeding 10 months. That situation is not present in today’s housing market as active inventory is almost 1 million, not 4 million like in 2007. Also, the monthly supply is 3.3 months, not the 10.8 months we saw with distressed sellers in 2008.
As we enter 2025, our weekly tracker has charted weakness over the last few weeks, especially as mortgage rates headed toward 7.25%. The previous two weeks we saw purchase application data growth and we will monitor all the fresh weekly housing data to keep you versed in what is happening in real-time so you don’t have to wait for old data.
