Housing Market Trends: Rising Sales and Shifting Inventory Dynamics

This week’s economic indicators focus on home sales, offering insights into the dynamics of both existing and new single-family homes. Here’s what the latest data reveals.

Existing Home Sales: Momentum Amid Challenges

For the first time since late 2021, existing single-family home sales have risen for three consecutive months (seasonally adjusted).

• December 2024: Sales increased 1.9% m/m.
• November 2024: Sales rose 5.0% m/m.
• October 2024: Sales climbed 3.5% m/m.

This upward trend resulted in a 10.1% y/y increase, marking the strongest annual growth since June 2021. Despite high mortgage rates and ongoing affordability concerns, higher inventory levels during 2024 supported this sales growth.

Inventory Insights:

• Peak Inventory in August 2024: 1.2 million homes (seasonally adjusted).
• December 2024: Inventory fell to 1 million homes, the lowest since March 2024.

This decline in inventory has compressed the market:

• December Supply: Just 3.1 months at current sales rates, the tightest supply since March 2024.

Looking Ahead:

While the recent sales strength is notable, declining inventories may once again constrain future sales. Additionally, high mortgage rates—hovering near 7%—continue to deter homeowners with favorable mortgage terms from listing their properties.

Annual Recap: Despite the late-year rally, 2024 sales of existing homes were the lowest in nearly 30 years.

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New Home Sales: Rebounding with Ample Supply

The story for new single-family homes differs significantly, with sales demonstrating resilience in the final months of 2024.

• December 2024: Sales rose 3.6% m/m to an annualized rate of 698,000 homes, following an upwardly revised 9.6% m/m increase in November.
• Annual Growth: Sales increased 6.7% y/y.

While the December figures were strong, they remained below peak months like September, July, and April 2024.

Inventory Dynamics:

• Unlike existing homes, new home inventory increased, reaching 494,000 homes in December—the highest level in 17 years.
• However, thanks to strong sales, the supply at current sales rates fell to 8.5 months, down from October and November levels.

Annual Recap:

Unlike the existing home market, new home sales in 2024 were far from historic lows. In fact, sales were the highest since 2007, with the exception of 2019 through 2021.

Key Takeaways

1. Existing Homes: Sales surged late in 2024, but tight inventories and high mortgage rates may limit future growth.
2. New Homes: Strong sales and robust inventories provide flexibility, positioning the new home market for more stability.

Both markets highlight contrasting challenges and opportunities, underscoring the complex dynamics of today’s housing market. Stay tuned for future updates as we monitor these key indicators.

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