Real estate market sees sharp seasonal slowdown amid high mortgage rates

The residential real estate market experienced a notable slowdown in December, marking the strongest seasonal decline in nearly two years. According to Ralph McLaughlin, a senior economist at Realtor.com, "Homes spent 70 days on the market, the slowest December in five years and the slowest month since January 2023."

During this period, homes lingered on the market for nine more days compared to December 2023. The inventory also saw a significant decrease of 8.6% from November, representing the largest drop since January 2023.

The deceleration in home sales was attributed to higher mortgage rates, which increased to 6.85% for the week ending December 26, as reported by Freddie Mac. Despite a decrease in the median listing price to $402,502—a reduction of about $15,000 from last year—potential buyers remained cautious.

McLaughlin noted that "high mortgage rates continue to bring a slow market," with December 2024 being particularly sluggish. Sellers were also less active; new listings only increased by 0.9% compared with last year and decreased by 2% from November.

On a positive note, there was an increase in homes under contract but not yet sold by 7.4% compared to last year. However, this was still significantly lower than November's growth rate of 14.7%.

Hannah Jones, another senior economic research analyst at Realtor.com, commented on typical end-of-year trends: "It is typical for the housing market to slow down at the end of the year as buyers and sellers focus their attention on end-of-year festivities." She added that elevated mortgage rates contributed to a sharper-than-usual slowdown between November and December.

Looking ahead, relief may come with marginally lower mortgage rates forecasted for 2025. Realtor.com's economists predict that average rates will be around 6.3%, potentially reducing homeowners' reluctance to list properties due to low current mortgage rates.

Home prices showed mixed trends; while median prices dropped by 1.8% year-over-year last month to $402,502, McLaughlin highlighted that "the typical home listed this year has increased in asking price compared with last year."

Housing inventory saw some improvement despite fluctuations: there were approximately 871,600 active unsold listings and about 350,000 under-contract listings on the market in December.

Jones offered insights into timing for potential buyers: "Winter may be a great time to buy for some buyers who are looking for more seller flexibility... spring may be better for those willing to pay more for their 'perfect' home."