Rising Tides in Real Estate: Record Home Sales Amid Surging Rates

In March, contract signings for homes hit their highest point of the year, accompanied by an increase in new home sales. However, with mortgage rates now around 7%, there are concerns about future buyer hesitancy.

The National Association of REALTORS® (NAR) reported a 3.4% increase in their Pending Home Sales Index for March, indicating modest yet consistent market activity. Lawrence Yun, NAR’s Chief Economist, noted that significant market improvements depend on reduced mortgage rates and more available housing.

Regional data showed strong growth in the South and West, with around 7% increases in each, and a smaller rise in the Northeast by 2.7%. The Midwest saw a 4.3% decrease, yet maintained higher year-over-year sales.  Looking ahead, NAR predicts a 9% increase in existing-home sales for 2024 and a 13.2% rise in 2025. Housing starts are also expected to grow by 1.2% this year and by about 5% in 2025. "Given the low sales levels of recent years and the substantial  increase in the U.S. population since then, a rebound in home sales is inevitable," said Yun. He anticipates a steady increase in inventory driven by new home construction and varying life events that prompt people to buy or sell homes.

While home sales are projected to climb steadily, NAR expects home prices to continue rising, reaching record levels. Yun explains, "The ongoing housing shortage will push prices up, though at a slower pace than before. Rising prices faster than income growth poses challenges, particularly for first-time buyers."

NAR forecasts that the median national home price will increase by 1.8% in 2024 to a new high of $396,800, up from $389,800 in 2023. The association expects a similar price increase in 2025, bringing the median price to $403,800. The pace of price growth in newly constructed homes is projected to be more moderate, with an expected increase of 0.6% to $426,100 in 2024. This slower growth rate is attributed to a shift by builders towards smaller, more affordable homes.