T
he year 2024 was supposed to bring a rebound in home sales, but instead, mortgage rates and inflation had other plans. Despite a late-year rally, home sales remain near recession-era levels, but there's hope that the new year might turn things around.

    At the beginning of 2024, it seemed like the real estate industry was on the mend. The Federal Reserve was making progress in taming inflation, and mortgage rates had stabilized at around 6.6%. Existing home sales rose in January and February, reaching an annualized rate of 4.4 million. However, instead of falling to 6% as predicted, mortgage rates surged to 7.2% in May, causing existing home sales to plummet to 3.9 million.

    The spring season was a bust, but September brought renewed hope with mortgage rates falling to 6.08%. However, the mood shifted again as rates climbed steadily over the next two months. Some buyers jumped into the market late in the year, pushing annualized sales above 4.1 million in November. Despite this improvement, the market remains stuck around that level for about two years.

    Experts point to several factors contributing to the unexpectedly high mortgage rates, including a strong job market, sticky inflation, and mortgage demand. The bond market's response to economic and political conditions is also having an effect. While consumers appear to be accepting elevated mortgage rates, it's too soon to know if this recent rise in sales reflects a blip or a trend.

    Some economists predict that growing pent-up demand will be unleashed during the first quarter of 2025 as rates begin to fall and inventory increases. However, economic uncertainty puts at risk a strong first-quarter housing market. If inflation continues to rise or the labor market softens, optimism for a rebounding 2025 housing market could be short-lived.