A new report illustrates just how stuck the housing market is

(CNN) — Just 2.5% of homes in the US changed hands this year in the first eight months, the lowest turnover rate in at least 30 years, according to an analysis by Redfin.

The latest data from the real estate brokerage underscores just how much the housing market has stalled in 2024 as Americans faced a toxic combination of record-high home prices and elevated mortgage rates, creating one of the most unaffordable housing markets in a generation. A rate cut by the Federal Reserve this month has fueled hopes that the interest rate-sensitive housing market will soon experience a fresh jolt.

“What this data tells us is that the housing market in 2024 has been really frozen,” said Chen Zhao, Redfin’s economic research lead. “We said the same thing in 2023 and I think there was this expectation that it couldn’t get any worse, but 2024 has been disappointing for the housing market.”

About 25 of every 1,000 homes were sold between January and August. That means 37% fewer homes were sold between January and August this year than during that same period in 2021 — which saw a pandemic-induced burst of home-buying activity — and 31% fewer homes than the same period in 2019.

Zhao said a market where 30 to 40 of every 1,000 homes changed hands would signify a healthier housing landscape.

Of course, one of the main reasons that fewer people are buying homes now is that there are fewer homes for sale. Just 32 out of every 1,000 homes were listed for sale in the first eight months of this year, the lowest level since at least 2012, the earliest year that Redfin has listing data available.

Where you live makes a difference

Some areas have suffered a bigger slowdown than others. Homes in suburban and rural areas changed hands slightly more often than those in urban areas, according to Redfin.

Geography also matters. Seven of the 10 metro areas with the lowest turnover levels this year are in California. Los Angeles saw the lowest turnover rate of any metro area analyzed by Redfin, with just 15 of every 1,000 homes changing hands — a 32% drop from the same period in 2019.

“In a place like Los Angeles, wages aren’t keeping up with housing prices,” said Jeremiah Vancans, a Los Angeles-based Realtor with Compass. “There is not that much new construction inventory hitting the market, and when it does, it’s not at entry-level prices.”

“The cost of construction is so high that building and then offering something below $1 million is hard to do,” he added.

Vancans also attributed the slowdown in Los Angeles to a slowdown in hiring in the entertainment industry, one of the city’s largest employers. Vancans estimated that the lagging effects of last year’s writers’ and actors’ strikes, along with business disruptions caused by streaming services, have dragged down entertainment workers’ employment prospects.

“I see a lot of entertainment workers out of work, and they haven’t been working for years. Their money is starting to dry up,” he said.

Boston was the second-slowest market and saw a nearly 38% drop in homes changing hands from five years ago.

Austin, Texas, which has emerged in the past few years as a major tech hub, saw the largest percentage decrease in home sales over the last five years of all 50 major metro areas analyzed by Redfin. The Texas state capital recorded 30 sales for every 1,000 homes this year, just about half of the 2019 rate.

Homebuyers in Sun Belt cities and areas within commuting distance to New York City had the biggest pool of options. More homes changed hands in Phoenix than any other metro area, Redfin found.

“We have been building a lot of new homes, which is giving us a higher supply of homes for buyers to choose from,” said Patrick Chamberlin, a Phoenix-based Realtor. “And, compared to some other parts of the country, homes in Phoenix are more affordable.”

Still, Chamberlin said even in Phoenix, home sales have slowed significantly compared to the pandemic years of 2020 and 2021.

“We’re still low from what we were used to over the last couple of years,” he said. “It still feels sluggish.”

Reviving a stagnant housing market

Mortgage rates have steadily fallen in anticipation of further interest rate cuts from the Fed, with the average 30-year fixed mortgage rate dropping to 6.08% in the week ended September 26, according to Freddie Mac. While that’s a significant decrease from the recent peak of 7.79% hit last fall, it’s still higher than average mortgage rates in the nearly 14 years between 2008 and 2022.

Zhao attributed this year’s historically lethargic home sales in part to the “lock-in effect.”

Most Americans who locked in lower mortgage rates before 2022 have been unwilling or unable to list their homes for sale because doing so would presumably require them to buy a new home at a much higher interest rate. According to the Consumer Financial Protection Bureau, nearly 60% of the 50.8 million active mortgages have interest rates below 4%.

“There has been very little incentive for people to sell homes,” Zhao said. “That very low inventory on the market was one of the primary drivers of there being so little turnover.”

A shortage of new home construction also contributed to America’s sluggish housing market. Experts estimate that the US needs to build more than 2 million homes to meet growing demand. That shortage has helped push home prices to record highs. The median sales price of an existing home in August was $416,700, the 14th consecutive month of year-over-year price increases, according to the National Association of Realtors.

“Getting to a healthy housing market is very hard from this point,” Zhao said. “I think the answer is either some variation of, you need a huge amount of supply right to come on, whether that’s new construction, or we somehow unlock existing homeowners.”

“It may be a five-to-10-year-long slog before you get back to a housing market that starts to resemble what we’ve had in the past,” she added.

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