This is the worst year for home sales in 30 years

This is set to be the worst year for home sales in 30 years

What you probably already know: This is set to be the worst year in nearly 30 years for home sales in the U.S. High prices and mortgage rates have buyers waiting to see if the market will improve, and sales of previously owned homes have been falling nearly all year. In September, sales fell 3.5% compared to the same period last year. Meanwhile, in some areas, home insurance costs have soared and, in some cases, homeowners aren’t even able to get insurance as companies continue to decline homes that are in tornado, flooding, hurricane or wildfire areas.

Why? Despite the Federal Reserve’s rate cuts last month, mortgage rates remained fairly high — 6.08% in September right after the cut. But they’ve risen since then and are back up to the highest levels since the summer. Some economists are pointing to the uncertain presidential election, which has markets spooked and buyers wary to make moves. Combine that with the labor and inflation rates, which have also been volatile this year, and it’s a market full of buyers who just aren’t feeling comfortable enough to take the leap.

What it means: Despite the slower demand, the national median home price was $404,500 in September, which is up 3% year over year. That and the high interest rates has many people who might be looking to move to a larger home, or to a different area, waiting — especially those who locked in much lower rates in the early 2020s. First-time home buyers, however, are on the rise as a percentage of the total buyers. About 50% of loans in the second quarter of 2024 were for first-time buyers, up from 45% last year, according to Freddie Mac.

What happens now? One of the major issues at play in the housing market is supply. There simply aren’t enough homes for those who want to buy them, which is what is keeping prices high even as buyers wait out the interest rates. That’s resulting in more renters, particularly in major cities, which is driving up rents considerably. The average rent in the U.S. is $2,050, up 3.3% compared to last year, and is much higher in cities like New York, San Francisco and Boston, where it exceeds $3,200. However, when you consider the high interest rates and home prices, it’s unlikely people will find homes in those same areas with a mortgage payment anywhere near that level.