December Housing Market Update: Inventory Gains Amidst Seasonal Slowdown

The U.S. housing market experienced significant shifts in December 2024, with a continued rise in active inventory despite seasonal declines.

According to Realtor.com, the number of homes actively for sale increased by 22% compared to December 2023, marking the 14th consecutive month of annual inventory growth. However, inventory remains 15.7% lower than pre-pandemic levels (2017–2019), reflecting a market still grappling with the effects of the pandemic-era housing boom.

Seasonality played a major role in the month’s trends, with inventory declining by 8.6% from November, the largest month-over-month drop since January 2023.

Additionally, Zillow reported that December’s inventory of just under 1 million homes was the highest for the month since 2019 but still 25% below pre-pandemic norms. These shifts in inventory have softened competition for buyers, but high mortgage rates remain a challenge, discouraging new listings and slowing sales.

Rising Mortgage Rates Cool Buyer Demand

Mortgage rates remained a key factor shaping the market in December. According to Redfin, the 30-year fixed mortgage rate rose to 7.04% by the end of the month, up from a low of 6.6% in early December. This spike in rates dampened homebuyer demand and led to a 4.5% decline in pending sales month over month.

The rate increase, driven in part by Federal Reserve guidance projecting fewer interest rate cuts in 2025, discouraged buyers from entering the market or finalizing transactions.

High rates also contributed to the 16.2% cancellation rate for home purchase agreements in December, the highest December rate on record, per Redfin.

Many potential buyers are instead opting to rent, waiting for rates to stabilize or decline before reentering the market.

Despite these headwinds, Realtor.com data shows a 1.5% rise in existing home sales in 2025 is projected as the "lock-in" effect—where homeowners avoid selling due to their low existing mortgage rates—eases over time.

Single-Family Construction Rises Despite Challenges

Amid high mortgage rates and construction costs, single-family homebuilding saw steady gains in December.

According to the National Association of Home Builders (NAHB), single-family housing starts increased by 3.3% month over month to a seasonally adjusted annual rate of 1.05 million units. For the full year of 2024, single-family starts totaled 1.01 million, marking a 6.5% year-over-year increase.

The multifamily sector also posted strong December numbers, with starts jumping 61.5% month over month to a pace of 449,000 units. However, multifamily construction declined 25% year-over-year, reflecting challenges in financing and a slower pace of deal-making in the rental market.

The increase in single-family starts highlights persistent demand for homeownership in a market characterized by affordability challenges and low inventory. Builders continue to address the housing shortage, which has kept prices elevated despite weaker sales activity.

Home Prices: Modest Growth, Regional Variability

Home prices showed mixed trends in December, reflecting regional differences and the ongoing inventory shortage.

According to Zillow, the national median home price stood at $358,461, and the typical U.S. mortgage payment increased 1.6% year-over-year. Meanwhile, Realtor.com reported a 1.8% decline in the median home price to $402,502, driven by an increasing share of smaller, more affordable homes.

Annual price gains were most prominent in regions with stronger demand. Per Redfin, the largest year-over-year increases were in San Jose (+7.9%), Providence (+6.7%), and Hartford (+6.5%). Conversely, Austin (-3.2%), Tampa (-2.5%), and San Antonio (-1.8%) experienced price declines, highlighting the variability of local market conditions.

Rising inventory, particularly in the South and West, is expected to moderate price growth in 2025.

According to Zillow, 10 of the largest 50 metro areas—primarily in Florida and Texas—have more homes on the market than pre-pandemic levels, a trend fueled by robust new construction.

Homes Taking Longer to Sell

Another notable trend in December was the increase in the time homes spent on the market.

According to Realtor.com, the typical home was on the market for 70 days, nine days longer than December 2023 and eight days longer than November 2024. This marks the slowest December in five years.

Similarly, Redfin reported that only 25.1% of homes went under contract within two weeks, the lowest share in five years. Homes in high-inventory regions, such as Nashville and Orlando, stayed on the market the longest, with increases of 22 days year-over-year.

However, in the Midwest and Northeast, homes spent less time on the market relative to pre-pandemic averages, suggesting tighter conditions in those areas.

This slowdown benefits buyers, offering them more time to negotiate or request concessions. However, sellers are increasingly pressured to cut prices or offer incentives to attract buyers. According to Zillow, 17.2% of listings had price cuts in December, up 1.7 percentage points from last year.