Why a housing market ‘thaw’ never came in 2024

As spring approached, more house hunters were actively exploring and submitting loan applications.

Despite the early stage of buying activity, it didn’t lead to an increase in sales. Existing home sales sank 4.3% in March to a seasonally adjusted annual rate of 4.19 million, per NAR. Mortgage rates remained elevated near 7%, further contributing to the slowdown.

“A lot of people were surprised that home prices did not go down as mortgage rates went up. This showed us that the supply and demand imbalance was more powerful than the borrowing costs,” Wolf said.

By summer, mortgage rates changed course and began to decline as new data showed that inflation was slowing. In June, the Fed held interest rates steady and projected a single rate cut for the year.

That still wasn’t enough to push some prospective homebuyers off the sidelines, with high costs remaining a major obstacle. Data from the National Association of Realtors showed sales of existing homes slumped 5.4% from the previous year in June, while the median sales price reached $426,900, marking a record high for the second consecutive month.

Expensive housing costs “threw some cold water on homebuyers who were hoping for a real turnaround in conditions,” Tucker said.

In September, mortgage rates fell more than half a percentage point over a six-week period as investors priced in interest rate cuts from the Fed, starting during the month and continuing through 2025.

But sales didn’t improve because many would-be buyers and sellers who were locked into historically low borrowing costs were playing the waiting game. Existing home sales fell to the lowest level since 2010 during the month of September, per NAR.

House hunters were hoping mortgage rates would drop further once the Fed cut interest rates to get serious about buying. The Federal Reserve cut its benchmark rate by half a percentage point on Sept. 18. But many economists warned that mortgage rates were unlikely to fall much further.

In fact, mortgage rates started to rise, moving closer to 6.5% in October, as markets adjusted their expectations about the scope and timing of future Federal Reserve rate cuts.

“Historically, mortgage rates move in tandem with Fed rate changes,” Wolf said. “This year, however, mortgage rates actually went up after the Fed cut rates. This is because investors ultimately drive mortgage rates, and they are taking in other economic data and policy proposals and allocating their funds accordingly.”

As 2024 comes to a close, the rate path looks uncertain. At its December policy meeting, the Fed projected two rate cuts for next year, down from a previous forecast of four. Investors remain concerned about sticky inflation data and the potential impact of the incoming Trump administration’s policies on price increases.

Read more: How the Federal Reserve rate decision affects mortgage rates

Analysts have said they believe that housing activity will pick up in 2025 as more homes hit the market with buyers and sellers adjusting to the reality of today’s higher interest rates.

In one encouraging sign, existing home sales for November were up 6.1% from a year ago, the largest year-over-year gain since June 2021, according to NAR.

“We think it’s going to continue to be a slow climb out,” Danielle Hale, chief economist at Realtor.com, told Yahoo Finance’s Claire Boston.

Dani Romero is a reporter for Yahoo Finance. Follow her on X @daniromerotv.

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