the staff of the Ridgewood blog
Ridgewood NJ, the American dream of homeownership continues to grow elusive as sales of existing homes in the U.S. fell to their lowest level since 1995, marking two consecutive years of record lows. According to the National Association of Realtors (NAR), sales dropped 0.7% last year, totaling just 4.06 million homes sold.
What’s Behind the Housing Slump?
Three primary factors have driven the ongoing decline in home sales:
- Elevated Mortgage Rates: Mortgage rates, which soared to a 23-year high of nearly 8% in late 2023, have remained stubbornly high, averaging around 7%. These rates have significantly reduced the buying power of prospective homeowners.
- Record-High Home Prices: The national median home price rose to an all-time high of $407,500 in 2024, a 4.7% increase from the previous year. This upward trend has made affordability a major hurdle, especially for first-time buyers.
- Inventory Shortages: The number of homes available for sale remains well below historical averages. As of December, there were 1.15 million homes on the market—far short of the typical 1.98 million seen in previous years.
Why Is Inventory So Low?
Experts point to a combination of factors:
- Lagging New Construction: Over a decade of below-average homebuilding has left the market struggling to meet demand.
- Homeowners Staying Put: Many existing homeowners are holding onto their properties, further tightening supply.
- Market Dynamics: Limited inventory continues to drive up prices, creating a challenging environment for buyers, particularly those in search of affordable options.
First-Time Buyers Struggling Most
First-time buyers, who historically make up 40% of the market, accounted for just 24% of home purchases in 2024. Without equity from a previous home sale, many are unable to meet the high down payments required in today’s market.
The Path Forward
While some economists predict a slight easing of mortgage rates this year, they are unlikely to drop below 6%, double the rates seen five years ago. This modest improvement may provide temporary relief, as evidenced by the 2.2% monthly increase in home sales in December. However, experts caution that the road to recovery will be long.
Lisa Sturtevant, chief economist at Bright MLS, states,
“It is going to take years before we are back at the annual average of 5.2 million home sales, maybe not even until the 2030s. The lack of inventory is the key constraint.”
A Call for Solutions
The housing crisis underscores the need for long-term solutions to increase inventory and improve affordability. While policy changes and increased home construction could alleviate some pressure, the challenges facing today’s housing market are complex and deeply entrenched.
As the nation grapples with this housing slowdown, prospective buyers and policymakers alike will need to navigate a market shaped by high costs, limited options, and evolving economic pressures.
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