Home Sales Plunge to Their Lowest Point Since 1995

Home Sales Plunge to Their Lowest Point Since 1995: What It Means for Buyers, Sellers, and the Market

If you’ve been following real estate headlines lately, you’ve probably seen the news: home sales have fallen to their lowest level since 1995. According to recent reports, existing-home sales took a significant dip in 2024, underscoring the continued challenges in today’s housing market. As experienced real estate professionals, we’re here to break down what this news means for both buyers and sellers in the Santa Barbara area—and where opportunities might still be found amid the slowdown.

A Look at the Numbers

Data shows a notable decline in existing-home sales over the past year, culminating in figures that we haven’t seen in nearly three decades. While 2023 already hinted at a downturn, 2024 solidified the trend by reaching transaction volumes that are exceptionally low. Key factors driving this slump include:

• High Mortgage Rates: Rising interest rates have added hundreds of dollars to monthly payments for many borrowers. This discourages first-time buyers and move-up buyers alike, curtailing overall demand.
• Lack of Inventory: Many homeowners locked into historically low rates during the pandemic era are choosing not to sell, reducing the number of available properties. This low inventory environment dampens sales volume—even if demand remains relatively robust in some regions.
• Economic Uncertainty: Inflation, job market concerns, and fluctuating consumer confidence also play into many Americans’ hesitancy to buy or sell, prolonging the slowdown in transactions.

Why Are Sales at a Near-Record Low?

This is not the first time the housing market has faced hurdles. However, the interplay of factors this time around is particularly challenging. In the past, a drop in demand would often lead to lower prices, which could spur additional buying activity. But in this unique environment, prices have remained relatively elevated in many areas due to the tight inventory, even as mortgage rates rise and buyer traffic slows.

1. Mortgage Rate Shock
   Mortgage rates have been ticking upward for much of the last couple of years, reaching levels that significantly reduce affordability. When interest rates climb, the number of homes that buyers can qualify for shrinks. Many prospective buyers choose to sit on the sidelines and wait for rates or home prices to come down.

2. Seller Rate Lock-In
   The bulk of current homeowners refinanced or purchased properties during a period of historically low interest rates. Selling now would mean giving up those favorable rates in exchange for today’s higher ones, effectively locking many would-be sellers in place.

3. Persistent Low Supply
   Fewer properties are coming onto the market, creating a sense of scarcity. Even motivated buyers, armed with financing, may find fewer suitable options. This mismatch between supply and demand has kept prices from dropping significantly, which in turn prevents the market from resetting and reigniting sales.

Implications for Buyers

If you’re a buyer in today’s market, the headlines can be daunting—but there are also potential silver linings:

• Less Competition: A significant drop in the number of overall home sales can mean fewer buyers to compete with. If you’re prepared financially, you may have more negotiating power on price or concessions like closing costs.
• Rate Strategy: While rates may be higher than what we saw in 2020 or 2021, consider the possibility of refinancing later if and when rates come down. If you find a property that fits your needs and budget now, you might still benefit from appreciation over the long term.
• More Time to Decide: In the frenzied market of a couple of years ago, buyers often felt pressure to make an offer immediately. Today’s slower pace could give you time to conduct thorough inspections, weigh your options, and avoid rushed decisions.

Implications for Sellers

Sellers face a different set of challenges:

• Pricing Carefully: In a market where sales are at historical lows, overpricing can be detrimental. Even though inventory remains tight, buyers are more cautious than ever. Setting a realistic price upfront can help attract serious offers and limit the time your home sits on the market.
• Highlighting Unique Features: With fewer buyers actively shopping, it’s crucial to make your property stand out. Upgrades, staging, and professional photography can make a big difference in generating interest.
• Working With Motivated Buyers: Buyers who are still in the market—even with higher rates—tend to be more serious. Be open to creative negotiations, such as rate buydowns or closing cost contributions, which can make your home more appealing.

Looking Ahead: Will the Market Rebound?

Predicting the housing market’s exact trajectory is never an exact science, but many analysts anticipate a stabilization if—and when—mortgage rates ease. If inflation cools and the Federal Reserve scales back rate hikes, we could see a gradual uptick in buyer activity. Additionally, as life events like job changes, family growth, and retirement continue, people will still need to buy and sell homes.

• Potential for Rate Drops: Even a modest decline in mortgage rates could bring some buyers back to the market, improving sales volume.
• Gradual Inventory Increase: Over time, some homeowners may decide it’s worth selling despite higher rates—especially if they’re relocating for work or retirement. An increase in listings could gradually balance supply and demand.
• Local Market Dynamics: Real estate is always local. Some regions might see faster recovery or stronger buyer interest, depending on job opportunities, population growth, and overall economic health.

Expert Tips: Navigating a Unique Market

1. Stay Informed: Markets shift quickly. Keep track of local housing data, mortgage rate trends, and neighborhood comps.
2. Consult Professionals: A trusted real estate agent and a knowledgeable lender can help you understand financing options, market trends, and pricing strategies.
3. Focus on the Long Term: If you plan on staying in your next home for several years, short-term market fluctuations may have less impact on your decision.

Will 2025 Be The Year You Sell Your Home?

The news that home sales have reached a nearly 30-year low might sound alarming, but remember that real estate has always been cyclical. For buyers who are financially prepared, the reduced competition can present a unique opportunity. For sellers, adapting your strategy to current market realities can help you close a successful deal. Ultimately, the best approach is to work closely with an experienced agent, stay tuned to the data, and remain flexible as the market evolves.

If you have questions about buying or selling in these uncertain times, feel free to reach out. We're here to help you navigate this shifting landscape with confidence and clarity.