2024 Housing Market: Key Takeaways and What Lies Ahead

2024 has been nothing short of a rollercoaster for most hopeful homebuyers, leaving many wondering when they’ll get their opportunity to buy a home.

And after years of rapid growth, historically low mortgage rates, and intense buyer competition, the housing industry faced plenty of speculation about a potential crash. However, instead of a downturn, home prices held steady.

As we gear up for the 2025 market, let’s take a look back at the housing trends that defined 2024.

The 2024 housing market

If you’ve been keeping an eye on the market, waiting for the right moment to make a move, but feeling like things have been unusually quiet in 2024—you’re not imagining it.

The residential real estate market has been stagnant this year, largely due to exceptionally low sales volume. At the heart of this slowdown is affordability, which remains one of the biggest challenges for buyers and sellers alike.

According to the National Association of Realtors’ (NAR) U.S. Fixed Housing Affordability Index, an index that measures whether a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data, we have a score of 98.

That’s the lowest score since the mid-1980s. That puts us at a near 40-year low in terms of affordability. Many prospective homebuyers can no longer afford the homes they want, leading them to stay on the sidelines and opt out of participating in the housing market.

This is further supported by the National Association of Home Builders, reporting there are 103 million American households currently priced out of the housing market.

But home sellers have played a role in this struggling market, too. Many sellers have sat on the sidelines, struggling to let go of their currently low mortgage rate.

Key factors influencing the 2024 housing market

The housing market is shaped by a variety of factors, including home prices, supply and demand, broader economic conditions, trends in new home construction, and prevailing mortgage rates.

Currently, some of the most significant influences on the housing market are the state of the economy, fluctuating mortgage rates, and a limited housing supply.

Home prices and inventory levels

Home prices are heavily influenced by supply and demand.

A recent analysis by Zillow revealed that the U.S. is facing a shortage of 4.5 million homes needed for a healthy housing supply. When there aren’t enough homes to meet demand in a housing market, both home prices and rental costs typically rise.

According to Redfin, in October 2024, U.S. home prices increased by 5.0% compared to the previous year, with a median sale price of $434,720. So, despite a sharp drop in demand, there are still more buyers than sellers.

Let’s not forget about the impact of new home construction. It hasn’t been keeping up with demand. As noted in a Freddie Mac research report, the housing shortage is largely driven by a sustained decrease in the building of single-family homes over time.

While elevated mortgage rates often slow down price growth or even push prices lower, the ongoing shortage of available housing has counteracted this effect.

Economic factors

In response to record-high inflation in 2022, the Federal Reserve began aggressively increasing the federal funds rate to bring inflation under control. This contributed to a sharp rise in mortgage rates.

By October 2024, inflation had slowed considerably, with the consumer price index increasing by just 2.6% year-over-year, a significant drop from its June 2022 peak of 9.1%. As a result of this progress, the Fed has shifted its approach, reducing its benchmark rate by 50 basis points in September and another 25 basis points in November.

While mortgage rates aren’t directly tied to the federal funds rate, they often fluctuate in response to investor expectations about how Fed policies will influence the broader economy.

The impact of mortgage rates

Although mortgage rates have decreased from their peak of nearly 8% in October 2023, they remain higher than what many homeowners and prospective buyers are accustomed to.

To put things in historical perspective, from 2010 until 2020, the average 30-year mortgage rate was 4.09%, according to Freddie Mac data. Then, during the pandemic, rates dropped even lower, reaching an all-time low of 2.65% in January 2021.

In 2023, mortgage rates began rising at a rapid pace. The higher rates have contributed to homebuying demand being relatively low in 2024.

Mortgage rates have also impacted home sellers. Many potential sellers have been hesitant to list their properties, unwilling to part with their existing low-rate mortgages. This “lock-in effect” constrained housing supply and helped keep prices from falling, even as rates spiked.

Housing market forecast for 2025

Mortgage rates are projected to decline in 2025, potentially improving affordability for buyers. This is likely to spark greater demand, however, which could keep home prices elevated or even drive them higher.

Home prices

Redfin forecasts that the median U.S. home sale price will gradually increase throughout 2025, finishing the year 4% higher than in 2024. This projected growth mirrors the trend seen in the latter half of 2024, driven by a persistent imbalance between supply and demand for housing.

The ongoing shortage of homes for sale has been a key driver behind rising housing prices. Unless new construction ramps up significantly, strong demand is likely to continue pushing prices upward.

Mortgage rates

Mortgage rates are expected to hover around 6.3% in 2025. That’s down over half a percent from the 6.7% average expected by the end of 2024.

According to Redfin’s economists, certain economic conditions—such as the effects of tax cuts and tariffs—could lead the Federal Reserve to make only a few small reductions to its benchmark interest rate. This would likely keep mortgage rates relatively high.

When it comes to 2025 mortgage rate predictions, there is a chance that rates could fall even lower if the economy slows down or if significant policy changes occur. However, rates could also rise further if inflation accelerates or the government deficit increases.

Home sales

Redfin forecasts that the annual rate of existing home sales will climb to between 4.1 million and 4.4 million in 2025, representing a 2% to 9% increase compared to 2024. However, the exact growth rate depends on several factors.

If mortgage rates remain elevated and inventory stays tight, the rise in sales could be modest. Conversely, if rates decline more than anticipated and the strong buyer demand seen in recent months persists, the increase in sales could be much more significant.

Is now a good time to buy a house?

Deciding whether it’s a good time to buy a house depends on various factors, including your personal financial situation, current mortgage rates and the conditions of your local housing market.

And while many prospective buyers are waiting for mortgage rates to decrease before entering the market, this could be a risky strategy. Yes, lower rates will make mortgages more affordable, but it’s important to consider that home prices may rise when interest rates drop.

As such, buying now could mean avoiding the increased competition and higher prices that often accompany lower rates.

Additionally, you may be able to save money in the future by refinancing your mortgage if rates decline. Some lenders have been offering “buy now, refinance later” programs, making it easier and more affordable for buyers to take advantage of current opportunities despite higher rates.

Consult with a real estate agent to understand the dynamics of your local market. If there are plenty of homes in your price range and minimal competition, now might be an opportunity to grab a good deal.

But here’s the bottom line. If your situation requires you to buy and it aligns with your budget, now is the right time to buy.

If you’re considering buying now, take the time to shop around and compare offers from multiple lenders. Getting several quotes can help you find the best deal and make the most of your investment.