Estimated reading time 10 min 13 sec.
The U.S. real estate market showed promising signs of recovery as existing-home sales ascended by 2.2% in December 2024, reaching a seasonally adjusted annual rate of 4.24 million. This marked the strongest pace since February 2024, with a remarkable 9.3% year-over-year growth. Below, we delve into the key highlights and their implications for investors and real estate agents.
Table of Contents
Rising Sales: A Promising Recovery Amid Challenges
The December increase in existing-home sales highlights a significant recovery after months of market stagnation. This upward trend is particularly noteworthy given the traditionally slower winter months.
- Year-over-Year Growth: Sales grew by 9.3%, the largest annual increase since June 2021. This suggests growing confidence among buyers despite elevated mortgage rates.
- Regional Variations: Three major U.S. regions experienced growth, while the Midwest saw a slight decline of 1.0%. The West recorded the highest annual growth at 12.9%, reflecting a shift in demand.
- Momentum Amid Challenges: As Lawrence Yun, Chief Economist at the National Association of REALTORS®, noted, “Momentum is rising with sales climbing year-over-year for three straight months. Consumers clearly understand the long-term benefits of homeownership.”
For investors, this rebound signals a window of opportunity, especially in high-demand regions like the West and Northeast. Real estate agents can capitalize on this momentum by targeting areas with significant growth potential.
Inventory Levels: Limited Supply Drives Prices Higher
The inventory of unsold existing homes dropped 13.5% in December to 1.15 million units, representing a 3.3-month supply at the current sales pace. While this is up from the previous year, it’s still below the ideal balance of a 6-month supply.
- Impact on Prices: The constrained supply pushed the median existing-home price to $404,400, up 6.0% from December 2023. This marked the 18th consecutive month of year-over-year price increases.
- Upper-End Market Performance: Sales of homes priced above $1 million rose by 35%, while those under $250,000 saw declines. This indicates a stronger performance in luxury markets, presenting opportunities for high-net-worth investors.
- Regional Pricing Trends: The Northeast led with an 11.8% price increase, followed by the Midwest with 9.0%. These figures highlight the potential for region-specific investment strategies.
For real estate professionals, understanding inventory trends and advising clients on competitive pricing strategies will be crucial in navigating this market.
First-Time Buyers: A Key Demographic to Watch
First-time buyers accounted for 31% of December’s sales, up from 29% in December 2023. This increase, though modest, reflects renewed interest among this crucial demographic.
- Affordability Challenges: Elevated home prices and mortgage rates continue to pose challenges for first-time buyers. However, job and wage gains are helping to offset these pressures.
- Government Programs: FHA loans, which cater to first-time buyers, accounted for 16.5% of total applications in December. This highlights the role of government-backed financing in supporting this segment.
- Opportunities for Agents: Real estate agents can build long-term relationships by educating first-time buyers on navigating the buying process and leveraging available resources.
Cash Sales and Investor Activity: A Strong Showing
Cash sales accounted for 28% of December transactions, underscoring the continued presence of investors and second-home buyers in the market.
- Investor Confidence: Individual investors or second-home buyers purchased 16% of homes, up from 13% in November. This stability in investor activity indicates confidence in real estate as a reliable asset class.
- Distressed Sales: Foreclosures and short sales represented just 2% of transactions, a sign of overall market health.
- Luxury Market Gains: With sales of homes above $1 million surging, the luxury segment remains a lucrative area for investors.
Mortgage Rates: The Balancing Act
Mortgage rates hovered near 7% in December, presenting both challenges and opportunities for buyers.
- Affordability Concerns: Higher rates can deter some buyers but also create opportunities for those with cash reserves or pre-approved financing.
- Stabilizing Trends: According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.96% as of January 23, down slightly from earlier weeks.
- Strategic Timing: Buyers who secure favorable rates now can benefit from long-term value as home prices continue to rise.
Opportunities Abound in a Rebounding Market
The December surge in existing-home sales marks a turning point for the U.S. real estate market. While challenges like limited inventory and elevated mortgage rates persist, the opportunities for investors and real estate professionals are undeniable.
Whether you’re an investor seeking to diversify your portfolio or a first-time buyer navigating the market, QKapital is here to guide you every step of the way. Contact us today to learn more about our tailored financing solutions and how we can help you achieve your real estate goals.
