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  Home  >  Communities  >  Lexington  >  Lexington Market Review  >  Single Family Home Market Summary

Summary

In many respects 2024 was a “rinse and repeat” of 2023. 2024 was impacted by rising mortgage interest rates – this caused sellers to postpone selling and buyers to pull back as they saw rates rise between getting a pre-approval and getting an accepted offer on a home. In some instances, this increase in borrowing costs caused buyers to exit contracts as repayment costs became simply too high.

Looking back at our 2023/2024 Market Review our two key predictions for 2024 were firstly the return to the normal cycle of downsizing, move-up, and relocating sellers would continue with a similar number of homes sales as we saw in 2023, and secondly, there would be some hesitancy with buyers with mortgage rates still over 6% and uncertainty over the medium-term market condition and price appreciation. This hesitancy would subside as mortgage interest rates decline as the year unfolded.

The continued high interest rates negatively impacted both predictions. The total number of homes sales in 2024 was lower than in 2023 as sellers postponed selling to avoid a large increase in their monthly mortgage repayments. The second prediction hinged on reduced interest rates as 2024 unfolded. Whilst interest rates declined slightly in Q3 they rose again in Q4 and as we write this in January 2025, they are now over 7%.

Given these characteristics many of the key performance metrics – days on the market and sale price/list price ratio - showed a relatively weak market in 2024. But closer examination shows a noticeable decline in these metrics as the second half of the year unfolded and the prospects of a substantial mortgage rate reduction declined. The sale price/list price ratio peaked at 106% in May and was at 102% for the full year, but it was at about 100% each month throughout the second half of the year.

How should we view these numbers? Home sales were lower than anticipated and are now lower than 2018/2019 levels (the last “normal” years prior to COVID). A 100% sales price/list price ratio was the value seen through each year from 2013-2020 and the 2024 value of 102% is a consequence of very limited inventory for buyers, able and willing to enter the housing market, having to bid house prices higher. Days on the market were consistent throughout the year at about 37 days (2023 value was also 37 days). And so, if we view these against the gloom and doom of the national real estate market it’s clear that the Lexington market weathered the market turmoil caused by the rapid rise in interest rates well. Proving that the adage ‘Real Estate is local’ is accurate.

As we look forward, what will 2025 bring? Mortgage interest rates are predicted to move slightly lower with currently 6.1% predicted for the end of 2025. But we’ve heard this story before and with such uncertainty in the overall economy we anticipate very similar real estate market conditions in 2025 as we saw in 2024. Any sign of more sellers, less hesitant buyers, and the stable market condition seen prior to the COVID years of 2020 and 2021 will have to wait until at least 2026.

Sellers

It is a more challenging picture for sellers than we have seen in recent years. A decrease in supply usually means that buyers compete for homes creating a strong sellers’ market. But 2024 saw very hesitant buyers in the market because of high interest rates combined with the high price appreciation seen in 2020 and 2021. With high interest rates set to continue throughout 2025 we do not anticipate more sellers entering the market. But, with hesitant buyers to get the maximum price for your home sellers need to focus on the fundamentals when selling – ‘move in’ ready, great staging, a comprehensive marketing strategy (utilizing both digital and traditional channels), and the right pricing strategy to attract the buyers who are looking to buy.

Buyers

While not as strong a sellers’ market as we have seen in prior years, the housing market in Lexington will continue to be challenging for buyers. The market will be characterized by low inventory, similar price levels to 2024, and high mortgage interest rates. So, when the right opportunity arises, buyers must be prepared to act quickly and decisively. It is key to work with an agent who both understands and can educate you on the Lexington market, provide advice on the pros and cons of the home and resale potential of the home, and is able to assist you in structuring a competitive offer.

Homes Listed

The number of homes listed has been declining since 2020 as COVID effects declined and the market reverted to the normal cycle of downsizing, move-up, and relocating sellers. The number of homes listed in 2022 was 384 – consistent with the market condition seen prior to the COVID years of 2020 and 2021. The number of homes sales declined 11% in 2023 to 341 and declined a further 8% to 314 in 2024. This decrease is caused by continued high mortgage interest rates and the associated reluctance of sellers to swap the very low mortgage interest rate on their current home for a higher mortgage rate on their next home.

Homes Sold

The number of homes sold in 2022 was 321 – consistent with the market condition seen prior to the COVID years of 2020 and 2021. The number of home sales declined 13% in 2023 to 279 and declined a further 6% in 2024 to an all-time low of 262. As noted above, this is because of continued high interest rates and the associated reluctance of sellers to swap the very low mortgage rate on their current home for a mortgage rate of over 6% on their next home.

Because of the 2023 market conditions the number of “homes listed” in 2024 is lower than the number of “homes available to buy” because many homes that were listed in 2023 failed to sell in 2023 and remained “on the market” into 2024. These unsold homes amounted to approximately a 15% increase in the number of homes available to buy over the number listed, further highlighting the reluctance of buyers to buy because of the high interest rates.

Sale Price to List Price Ratio

One of the strongest indicators of demand is the ratio of the sales price to the list price. An average ratio of over 100% means that, on average, there was competition, resulting in buyers competing to buy the home and paying more than the asking price. The Lexington market has seen this indicator at approximately 100% throughout 2013-2020. COVID and the ensuing widespread re-evaluation of what homeowners required in a home saw this indicator rise to 106% in 2021. This high value is indicative of a very strong seller’s market. 2022 saw this indicator rise further to 107% when we aggregate over the full year. 2023 and 2024 saw the metric decline to 102% as a consequence of very limited inventory with the limited number buyers, able and willing to enter the housing market, having to bid house prices higher.

Sale Price to List Price Ratio (Monthly/NC)

Breaking down the Sales Price to List Price Ratio by month and property type shows two noticeable aspects of the housing market. Overall, the ratio declined from June through December. This was caused by uncertainty over mortgage interest rates, the increase seen in Q4 and the realization that mortgage interest rates were not going to decline to 6% at year-end as predicted 12 months previously. The ratio for new construction homes was lower than for existing homes. This was caused by a slight oversupply of new construction homes in 2023 (carrying over into 2024) and the very high carrying costs faced by developers on unsold homes. These effects forced developers to discount from the list price (developers, unlike many homeowners, cannot delay listing due to changing market conditions) and need to sell quickly to minimize carrying costs.

Average Days on Market

Another indicator of demand is the length of time homes are on the market, known as “Days on Market”. Homes were on the market for an average of 37 days in both 2023 and 2024 before going under contract, compared to 28 and 24 days in 2021 and 2022. It is important to note that this is an aggregate number covering all price points. Lower price points, below $2.5 million, saw numbers closer to 28 days. Higher price points, above $2.5 million, saw numbers closer to 99 days.

Average Sale Price

The average sale price increased to just over $1.9 million in 2024, an increase of 5% over 2023 prices. In prior years we noted that some caution was needed when drawing conclusions from these price appreciation numbers because of changes in the sale price distribution. This was also the case this year because we saw roughly the same number of existing home sales and a decrease in the number of new construction home sales but selling at a higher average price. The average new construction home price increased in 2024 to $3.0 million. 5% is the adjusted price appreciation for existing homes compared to 1%-2% in 2023.

The median house price for the overall market rose to $1.7 million in 2024, an increase of 1.4% over 2023 prices. The median house price for existing homes rose to just below $1.6 million, an increase of 6% over the 2023 median price.

Sale Price Analysis

Splitting average sale price by new construction and existing homes shows the shows two price appreciation trends. New construction prices rose sharply in 2021 and 2022 but corrected downwards in 2023 because of over building in 2022. Prices rose in 2024 to an average price of just over $3 million.

Existing homes price appreciation rose sharply in 2020 and 2021 but slowed markedly in 2022, 2023 and 2024 as the effects of interest rate rises impacted buyer's affordability.