The 2023 housing market witnessed the fewest existing home sales since 1995. Signs indicate a mild improvement in 2024.

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Let's be candid: 2023, a year marked by the fewest existing home sales since 1995, wasn't a stellar year for many agents and loan officers who rely on transactions. Spiked mortgage rates led to reduced market turnover, as numerous homeowners hesitated to relinquish their 2% or 3% mortgage rates for those hovering around 6% or 7%.

This decline in existing home sales has coincided with a slight decrease in the number of U.S. real estate agents. Membership at the National Association of Realtors fell by 2.08% between January 2023 and January 2024, dropping from 1,548,058 to 1,515,837 members.

Why wasn't the agent decline more significant, given the sharp pullback in existing home sales? One reason is that savvy agents in some markets managed to redirect their focus from the constrained existing market to the resilient new home market, which also witnessed many builders reinstating agent incentives/commissions.

Click here to view an interactive version of map below

The silver lining? The annualized 3.78 million existing home sales reading in December might be the bottom.

Fannie Mae anticipates existing home sales to increase to 4.46 million by Q4 2024, and 5.03 million by Q4 2025. The Mortgage Bankers Association projects existing home sales to climb to 4.61 million by Q4 2024, and 4.90 million by Q4 2025.

New listings—which fell hard during the mortgage rate shock—appear to have bottomed. According to Realtor.com the number of U.S. new listings (click here for the chart) in January 2024 (295,178 homes) was 2.8% above January 2023 levels (287,140 homes). Although still 26.0% below January 2019 levels (399,032 homes). If new listings continue to rise year-over-year, assuming the economy holds firm, existing home sales should also rise.

The average 30-year fixed mortgage rate tracked by Mortgage News Daily has dropped from 8.03% in October to 6.98% as of Friday. This improvement in affordability translates into slightly reduced "switching costs" for homeowners contemplating selling their homes to purchase something else.

We've endured mortgage rates over 6.0% for over 19 months. During this period, many homeowners on the sidelines have experienced lifestyle changes, such as expanding families, leading to growing impatience. This impatience and frustration with their current homes lowers the "switching costs" for them personally. Remember, "switching costs" encompass both financial and psychological aspects.

It's important to emphasize that an uptick in existing home sales doesn't mean we're back to boom times, but it does suggest that the worst might be behind us.

Is the U.S. housing market underbuilt? And by how much?

This weekend, ResiClub PRO members will get our round up of 11 studies (some of which aren’t public) looking at that very topic.

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