Home Sales Hit 30-Year Low           

In the first eight months of 2024, only 2.5% of homes were sold, marking the lowest residential turnover rate in at least 30 years, according to Redfin. Sales are down 37.5% compared to the 2021 pandemic boom and 31% lower than in the same period in 2019. Affordability and limited housing supply have contributed to the decline, with homes changing hands slightly more often in suburban and rural areas than in urban ones. However, turnover in suburban and rural homes has fallen faster since 2019 than in urban areas.

Despite falling mortgage rates, buyers have yet to return in large numbers. Many homeowners are locked into low-rate mortgages and are hesitant to sell, especially as demand remains weak for homes needing extra work. The number of homes listed for sale has also dropped to its lowest level since at least 2012, with only 32 out of every 1,000 homes listed in 2024, a 30% decline from 2019.

Housing Affordability Improves Annually for First Time Since 2021

In August 2024, national housing affordability improved year-over-year for the first time since 2021, driven by a 3.1% increase in household income and a decrease in mortgage rates. Real house prices dropped 4.4% annually, while consumer house-buying power increased by 9.3%. Despite nominal house prices hitting record highs, lower mortgage rates and higher incomes improved affordability. The Federal Reserve’s recent rate cuts could further reduce mortgage rates, potentially boosting affordability by 7% if rates drop to 6% by the end of 2024.

State highlights showed affordability improvements in most areas, with Illinois and New Jersey being the only states experiencing a rise in real house prices. Markets like Buffalo, Cincinnati, and Milwaukee saw the most significant annual price increases, while Tampa, Denver, and Portland experienced substantial declines in real house prices. Further rate reductions in 2025 could provide more relief for homebuyers.

Pending Home Sales Increase Slightly

Pending home sales rose by 0.6% in August, reaching a Pending Home Sales Index of 70.6, as the National Association of Realtors (NAR) reported. This slight increase reflects an improvement in housing affordability due to mortgage rates dropping to 6.5%. However, pending transactions were still down 3.0% compared to the previous year, indicating continued challenges in the housing market.

NAR Chief Economist Lawrence Yun noted that while mortgage rates have decreased, contract signings remain low as home prices continue to hit record highs. The anticipation of more short-term rate cuts has helped lower long-term mortgage rates to near 6%, translating into significant monthly savings for buyers.