The housing market is showing signs of renewed strength, with existing-home sales seeing their largest annual increase since mid-2021. As we head into the new year, several key indicators suggest a shift that could benefit both buyers and sellers.
A Positive Turn for Home Sales
Home sales are on the rise, marking the most significant year-over-year increase in more than three years. According to recent data, completed transactions—including single-family homes, townhomes, condos, and co-ops—jumped 9.3% annually in December, with a 2.2% month-over-month increase. After a challenging 2024, when sales hit their lowest level in nearly three decades, this upward trend offers a hopeful outlook.
Several factors are contributing to this rebound. Job growth, wage increases, and an expanding inventory of homes for sale are helping to boost buyer activity, even as mortgage rates remain a key consideration.
Home Prices Continue to Climb
Homeowners are seeing rising property values, with the median sales price increasing by 6% in December compared to the previous year. Despite fluctuations in sales volume, home prices have remained resilient, reaching a record median price of $407,500 in 2024.
Higher-end homes have seen the strongest demand, which has influenced overall price trends. Sales of properties priced above $1 million surged by 35% over the past year, while sales of homes under $250,000 declined.
However, affordability remains a challenge for first-time buyers. While their share of purchases increased slightly to 31% in December (up from 29% the previous year), overall affordability concerns have kept many from entering the market. On the other hand, cash buyers—primarily investors and existing homeowners—have increased their presence, making up 28% of all transactions.
More Inventory Means Greater Competition for Sellers
The number of homes for sale has grown by 16% compared to last year, providing buyers with more choices. Currently, the market has a 3.3-month supply of available homes, which is a notable increase but still below the level typically considered a balanced market.
New construction is also adding to inventory levels, with single-family home building rising 6.5% in 2024. Experts anticipate a modest increase in new home construction in 2025, driven by ongoing housing shortages and strong economic conditions.
Buyer demand remains steady, with many homes still selling quickly. In December, 53% of real estate professionals reported that their listings sold within a month, and homes typically remained on the market for an average of 35 days—slightly longer than the 29-day average from the previous year.
Mortgage Rates: The Unpredictable Factor
Interest rates remain a key variable in the market. The 30-year fixed mortgage rate recently dropped to 6.96%, after briefly surpassing 7%—a level that had slowed buyer activity. As rates fluctuate, affordability remains a concern, but experts predict a possible decline to around 6.5% by the spring buying season.
Regional Housing Market Trends
Home sales increased in most U.S. regions in December, with the Northeast leading the gains. The Midwest was the only region to see a slight decline, though prices have risen across all areas.
Northeast: Sales climbed nearly 4% from November and are up 10.4% year-over-year. The median price reached $478,900, an 11.8% increase from last year.
Midwest: Sales dipped 1% from the previous month but remain 6.5% higher than a year ago. The median price rose 9% to $298,600.
South: Sales grew 3.2% month-over-month, up 9% annually, with a median price of $361,800—3.4% higher than last year.
West: Sales rose 2.6% in December, reflecting a 12.9% increase from a year ago. The median price hit $614,500, up 6% from last year.
Looking Ahead
As we move into 2025, the real estate market is showing promising signs of stability and growth. With increasing inventory, steady buyer demand, and the possibility of lower mortgage rates, both buyers and sellers have opportunities to make their moves.
Thinking about buying or selling this year? Let’s connect to discuss your goals and how you can navigate the evolving market.
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Source: www.nar.realtor