The United States witnessed its lowest home sales in almost three decades, with only 4.09 million homes sold in 2023, marking the lowest figure since 1995. The National Association of

Realtors attributed this decline to a significant surge in interest rates, causing increased costs for potential buyers and dissuading sellers with lower rates from listing their properties.

Tight supply conditions further exacerbated the situation, pushing home prices to a new record high. The National Association of Realtors expects a potential improvement in the housing market in 2024 but highlights concerns about ongoing affordability challenges.

According to the organization's widely tracked report on existing home sales, which constitute the majority of property transactions in the US, the median sale price in 2023 increased by 1% over the year, reaching $389,800 (£307,625). The median price has surged by over 40% since 2019, primarily due to the sharp price increases during the pandemic.

Lawrence Yun, an economist at the NAR, expressed concerns about the sustainability of recent price hikes, emphasizing the need to boost housing supply to create a viable path to homeownership for renters. Yun warned of a potential acceleration into economic disparities between those who can afford homes and those who cannot if price increases persist at the current pace.

The US housing market experienced a significant slowdown starting in 2022, coinciding with the Federal Reserve's decision to raise interest rates to counter inflation. Last year, US mortgage rates, typically fixed for a 30-year period, exceeded 7% for the first time in decades, ending a buying frenzy that had emerged during the pandemic when the central bank had lowered rates to stimulate the economy.

This rise in interest rates created a notable divide between potential buyers and existing homeowners, many of whom held loans with rates below 4%. The housing market may have reached a bottom in December, as Yun suggested, with recent months seeing a drop in mortgage rates to 6.6%, the lowest level since May.

However, experts like Nancy Vanden Houten from Oxford Economics caution that although lower rates may boost demand, rates are expected to remain above 6%, potentially insufficient to prompt a significant increase in sellers entering the market. The scarcity of available homes for sale is predicted to keep home price growth positive in the coming year.