Although housing affordability has improved in the past year, this hasn’t led to a meaningful increase in existing-home sales. In fact, 2024's total home sales may end up even lower than 2023's 4.09 million, which was already far below pre-pandemic levels of 5.34 million in both 2018 and 2019, according to the ResiClub blog. Sales have been stagnant, and only a 5% increase is expected over the next year. This is primarily due to the "lock-in effect," which makes homeowners with low-interest mortgages unwilling to sell. Historically, when affordability improved by 10% or more, home sales typically grew by 16% year-over-year, but that hasn't been the case this time.
"This quantum improvement in affordability [over the past year] has only happened a few times in the past four decades. In most other years, a rise in affordability at this scale would lead to healthy growth in home sales over the next year or two," wrote Jim Egan, Morgan Stanley’s head of housing market research, in a report last week.
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