Only 2.5% of U.S. homes changed hands this year, Redfin says

Turnover in the U.S. housing market is the lowest it has been in more than three decades
By Sam Bourgi
•
10 October 2024
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The U.S. housing market has lacked both buyers and sellers this year, with more Americans choosing to wait on the sidelines until mortgage rates decline.

According to Redfin, just 2.5% of U.S. homes changed hands between January and August of 2024, the lowest in at least 30 years.

By comparison, the turnover rate was 4% during the “pandemic buying frenzy” in 2021, when mortgage rates were at rock bottom. Total home sales this year are 37.5% lower than in 2021.

Redfin noted that home sales and listings are down by at least 30% from pre-pandemic levels.

“Mortgage rates have fallen more than one percentage point from their 2024 peak, but we have not yet seen a significant increase in the number of homes changing hands,” said Elija de la Campa, Redfin’s senior economist.

“With the majority of homeowners locked into low mortgages, rates will need to keep falling consistently for many to feel comfortable moving on from the deals they secured years ago,” de la Campa explained.

According to Creditnews Research, nearly two-thirds of U.S. homeowners purchased their property when mortgage rates were below 4%.

While these homeowners have seen the value of their properties surge since the pandemic, they’re reluctant to cash in because they don’t want to give up their ultra-low mortgage for a more expensive one.

According to Freddie Mac, the average 30-year fixed-rate mortgage was 6.12% as of Oct. 3.

Rates will need to continue falling before housing activity picks up again. Even then, it’s no guarantee that housing will become more affordable.

Contract activity hits rock bottom

America’s housing market may have hit rock bottom during the summer, with pending home sales reaching the lowest level on record.

According to the National Association of Realtors’ pending home sales index, contracts to buy previously owned homes declined 5.5% in July.

While sales recovered slightly in August, contract activity remains very low by historical standards.

Research from the Conference Board suggests that sales activity is likely to remain subdued for the foreseeable future. According to the firm, the percentage of Americans planning to buy a home over the next six months fell in August to the lowest level in 11 years.

Like other studies, the Conference Board’s research suggests that Americans are still apprehensive about buying a home at current mortgage rates. However, the irony is that lower mortgage rates do not guarantee affordability.

According to Telsey Advisory Group executive Joe Feldman, lower mortgage rates would improve affordability for a maximum of six months. Beyond that, lower rates only encourage more buyers into the market, driving up home values.

This means housing will become less affordable in a low-rate environment.

Lower rates mean buyers “can actually pay more for a home than they otherwise would,” said Realtor.com senior economist Ralph McLaughlin.

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