AUSTIN — U.S. existing home sales have reached their lowest levels in nearly 30 years, despite a surge of millennials entering their prime homebuying years, and activity likely won’t bounce back until interest rates start coming down.

“I thought by this time the housing market would be recovering. It has not yet recovered. Home sales are still down from last year,” said Lawrence Yun, chief economic with the National Association of Realtors, speaking Thursday at the annual conference of the National Association of Real Estate Editors in Austin.

The Federal Reserve gave guidance in December that it might cut rates three to four times in 2024. But inflation has remained more persistent than expected, and forecasts are now down to one or two cuts this year, Yun said.

Although the country has 70 million more people than in 1995, existing home sales nationally are now at levels seen in that year, he said.

Selma Hepp, chief economist at CoreLogic, called 2024 “the year of the head fake” when it comes to housing.

“We started the year expecting a recovery in the housing market. It turned out to be more of the same. Mortgage markets remain elevated,” she said at NAREE.

Rates matter because monthly payments are running about 80% higher for the exact same home than they were prior to the big jump in mortgage rates, Hepp said.

Hepp said even if sales aren’t picking up steam, home prices are. Her forecast calls for a 5.7% gain nationally, describing it as “another really robust year” for home prices.

The inventory of homes is growing, which should give buyers more options and could lift sales, especially if rates come down. Metro Denver, for example, has 3.4 times as many listings this year as it had in the first five months of 2021.

Hepp said where the strongest home price gains are happening is shifting. Formerly hot southern markets like Texas and Florida have been replaced by markets in the Northeast, Midwest and California.

“Markets that are seeing a lot of job growth aren’t seeing high home price appreciation,” she said.

Through the first five months of the year, the median price of a home sold in metro Denver is 2.76% higher than in 2023, although prices remain 1.5% below the peak reached in 2022.

Odeta Kushi, deputy chief economist at First American Corp., said millennials have surpassed baby boomers as the largest generation. Although a smaller percentage own homes than comparable generations did at their age, most are still looking to buy — it’s just taking them longer to get there.

Affordability remains a challenge, but lower interest rates should help when they arrive. And the housing market will have a strong foundation of demand for the next several years.

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