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Can the U.S. Climb Out of Its ‘Unprecedented’ Housing Crisis?
The 2024 housing market was the slowest in decades. Next year’s might not be much better. It may come down to how many new homes can be built.
A young family in Grand Rapids, Mich., has been looking for a larger house for three years, losing countless bidding wars. In Portland, Maine, a 29-year-old data analyst has been anxious to get out of their rental for a year, but hasn’t found a home to buy.
The story of the 2024 housing market has been one of a nation frozen in place, with millions of people unable to move amid rising home prices, stubbornly high mortgage rates and a drastic shortage of inventory. The year is on track to have the slowest housing market in three decades, with a projected four million home sales, according to the National Association of Realtors — making 2024 the second straight year of historically anemic sales. The last time sales dipped that low was in 1995, when the U.S. population was 22 percent smaller than it is today.
“This is just an incredibly low figure considering how many people we have in America, and Americans’ general view that as their situation improves, they move,” said Lawrence Yun, N.A.R.’s chief economist. “I simply don’t think that you can remain at this low level.”
The depths of the housing slump surprised even economists, who had predicted that by spring, mortgage rates would fall enough to pull sales out of last year’s doldrums. Instead, inflation remained stubborn, driving up interest rates. By April, the average rate on a 30-year mortgage had topped 7 percent, stalling sales during what should have been peak shopping season. Buyers simply couldn’t afford what was available, while sellers, reluctant to trade historically low pandemic-era mortgages for much higher ones, had little incentive to list their homes. Despite the lack of activity, prices kept rising because there were so few homes available.
This housing crisis is largely a supply crisis, and not just because people aren’t selling their homes. The country simply hasn’t built enough new homes to keep pace with a growing population: Zillow puts the shortage at 4.5 million homes, Freddie Mac at 3.7 million. Builders have been struggling against higher costs for borrowing, materials and labor — relics of the pandemic. In October, new housing starts for single-family homes dropped by 6.9 percent from September, to 970,000, according to the Census Bureau.
