Are Real Estate Sales Down? A 2024 Market Overview
As we progress through 2024, the real estate market is experiencing notable shifts. Following a post-pandemic boom, real estate sales across the U.S. are witnessing a slowdown characterized by declining transaction volumes and persistent price pressures. High mortgage rates, economic uncertainty, and shifting affordability contribute to this trend. Here’s an in-depth look at why real estate sales are down, who is most affected, and the forecast for the remainder of the year.
Why Are Real Estate Sales Slowing Down?
The sharp increase in mortgage interest rates is the most significant factor impacting real estate sales this year. As the Federal Reserve raised rates to combat inflation, mortgage rates surged to around 7% in late 2023 and have remained elevated throughout 2024. These higher rates make monthly mortgage payments considerably more expensive, pricing many potential buyers out of the market. Realtor.com predicts home sales will decline by about 14.1% this year, reaching their lowest level since 2012.
At the same time, home prices remain elevated in many areas due to limited supply and the lingering effects of the post-pandemic surge. High prices and mortgage rates have created an affordability crisis for first-time buyers who need help to keep up with elevated monthly payments. Even though prices are expected to stabilize or slightly decrease in certain regions, they remain out of reach for many, resulting in fewer transactions.
Regional Differences: Where Sales Are Hit the Hardest
The decline in real estate activity is not uniform across the U.S. While sales are down nationwide, certain areas are more impacted than others. Major metropolitan areas that experienced rapid price increases during the pandemic—such as Phoenix, Austin, and Boise—are now seeing some of the steepest price and transaction volume declines. These cities became popular migration hotspots over the last few years, but with remote work normalizing and mortgage costs climbing, demand is receding.
Conversely, more affordable Midwestern and Northeastern cities, including parts of Connecticut, upstate New York, and Illinois, are holding up better. These regions did not see dramatic price hikes, and their relative affordability keeps them resilient in a slower market. Sales activity remains stable in these areas, and prices are less likely to drop significantly.
Current Market Conditions: Fewer Listings, Longer Sales Cycles
With fewer people able to afford new purchases, homes stay on the market longer. This trend is helping to increase inventory slightly, but not by the usual means. Instead of an influx of new listings, the market is accumulating properties because they are not selling as quickly. Realtor.com projects that overall inventory could rise by around 22.8% this year, a potential silver lining for buyers who have been frustrated by low availability in the past few years. However, the number of listings remains below pre-pandemic levels, so competition remains fierce, especially in more affordable markets.
Additionally, sellers are increasingly reluctant to reduce asking prices, even though demand has cooled significantly. Many homeowners refinanced their mortgages at historically low rates during the pandemic and are hesitant to sell and buy a new home with a much higher mortgage rate. As a result, listings may stay on the market for longer, but prices are not dropping as much as some buyers may hope.
The Outlook for Buyers and Sellers in 2024
For buyers, the 2024 market may feel discouraging. High prices and high mortgage rates mean that the cost of owning a home is still substantial. Those who purchase this year may need to explore creative financing options, such as adjustable-rate mortgages, which offer lower initial rates than traditional 30-year fixed loans.
The landscape is also challenging for sellers. While they may not be forced to lower their prices drastically, they are unlikely to see the kind of rapid, high-price sales that were common during the pandemic. Sellers may need to wait longer to find buyers and, in some cases, offer incentives like covering closing costs or making repairs to attract offers.
What Lies Ahead for Real Estate Sales?
Looking beyond 2024, some experts anticipate that if inflationary pressures ease, both mortgage rates and home prices could stabilize. This would help buyers re-enter the market and potentially spark a recovery in transaction volumes. However, it’s unlikely we’ll see a return to the ultra-low rates and high sales levels of 2020 and 2021 anytime soon. Instead, a slower, more gradual normalization is expected, with most markets settling into a more balanced state by 2025.
While the current environment presents challenges, it also provides opportunities for buyers willing to shop in more affordable areas or wait for rates to come down. As affordability improves through slightly lower prices or reduced interest rates, the market could regain momentum, allowing more buyers to enter.
Key Takeaways
- Higher Mortgage Rates: Mortgage rates of around 7% have priced many buyers out of the market, leading to fewer sales.
- Regional Variation: High-demand cities are experiencing greater declines, while affordable Midwestern and Northeastern cities are more resilient.
- Inventory Levels: Homes are staying on the market longer, leading to a modest increase in listings, though inventory remains tight.
- Market Stabilization Expected: Experts forecast a gradual market recovery, with normalization potentially extending through 2025.
Staying informed on the latest trends can help buyers and sellers make sound decisions in a shifting market. While the current environment may feel challenging, understanding the underlying factors can help navigate the real estate market in 2024 and beyond.
