Positive Trends in Home Sales Offer Optimism for 2025

Positive Trends in Home Sales Offer Optimism for 2025

The real estate market is gaining momentum as existing-home sales see their most significant annual surge since mid-2021. Here are key housing trends shaping the industry.

A notable rebound in home sales is underway, marking the most substantial year-over-year growth in over three years. According to the National Association of REALTORS® (NAR), completed transactions involving single-family homes, townhouses, condominiums, and co-ops saw a 9.3% annual increase in December, along with a 2.2% month-over-month rise. This uptick brings optimism that the sluggish housing market of 2024—which recorded the lowest existing-home sales levels in nearly three decades—may finally be left behind.

NAR Chief Economist Lawrence Yun highlighted that home sales showed a strong recovery in the year’s final months despite persistently high mortgage rates. He noted that winter sales are typically lower than those in the spring and summer, but the market has shown steady annual gains for three consecutive months. The rise in job opportunities, wage growth, and an increase in available housing inventory have played a role in boosting sales.

Increased Inventory Brings More Competition

The number of unsold existing homes has grown by 16% compared to the previous year, offering buyers more options and creating a more competitive environment for sellers. At the current pace of sales, the inventory supply stands at 3.3 months.

New construction is also contributing to the inventory increase. Builders have been expanding single-family home developments, with construction activity rising by 6.5% in 2024. Carl Harris, chairperson of the National Association of Home Builders, stated that new supply continues to enter the market despite ongoing challenges such as high mortgage rates and construction costs. Experts predict a slight increase in single-family home construction in 2025 due to persistent housing shortages and stable economic conditions.

Buyer demand remains strong, with existing homes selling relatively quickly. According to the REALTORS® Confidence Index, 53% of real estate professionals reported that their listings sold in under a month in December. On average, properties remained on the market for 35 days, up from 29 days a year earlier.

Home Prices Continue to Climb

As property values keep rising, homeowners are seeing their equity grow. NAR reports that the median sales price for existing homes in December increased by 6% year-over-year, reaching a record high of $407,500 in 2024.

The higher-priced segment appears to be driving this trend. According to Yun, elevated median prices can be attributed in part to the strong performance of the luxury housing market. Sales of homes priced above $1 million rose by 35% compared to the previous year, while properties priced under $250,000 experienced a decline in sales.

While this growth benefits existing homeowners, it presents challenges for first-time buyers who lack the advantage of equity from a prior home sale. NAR data indicates that first-time home buyers made up 31% of December’s sales, an increase from 29% in December 2023. However, the overall share of first-time buyers in 2024 dropped to its lowest recorded level, largely due to affordability concerns.

Meanwhile, existing homeowners and investors are relying more on cash transactions, with all-cash purchases rising to 28% of total sales in December.

Mortgage Rates Remain a Key Factor

This week, the 30-year fixed mortgage rate experienced a slight decline, averaging 6.96%, following a rise to 7.04% the previous week. This marks the first time since May that rates surpassed 7%, according to Freddie Mac. The increase temporarily slowed mortgage applications as buyers reassessed affordability. However, applications improved slightly as rates dipped below 7% again.

Yun anticipates further moderate declines in mortgage rates over the next few months, potentially reaching 6.5% in time for the spring homebuying season.

Regional Housing Market Performance

Three out of four major U.S. regions saw a rise in existing-home sales last month, with the Northeast leading the way. The Midwest was the only region to experience a slight decline. Despite fluctuations, all four regions reported year-over-year growth in both sales and home prices.

A closer look at December’s regional performance:

• Northeast: Sales increased by nearly 4% from November 2024, reaching an annual rate of 530,000—a 10.4% rise compared to December 2023. Median price: $478,900, up 11.8% from the prior year.
• Midwest: Sales declined by 1% in December, bringing the annual rate to 990,000. However, sales were still 6.5% higher than a year earlier. Median price: $298,600, reflecting a 9% increase from December 2023.
• South: Sales climbed 3.2% from November to reach an annual rate of 1.93 million in December, marking a 9% year-over-year increase. Median price: $361,800, up 3.4% from the previous year.
• West: Sales rose by 2.6% in December to an annual rate of 790,000, showing a 12.9% increase from the prior year. Median price: $614,500, up 6% year-over-year.

With positive indicators emerging across multiple regions, 2025 could see continued recovery and growth in the housing market.