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Existing-home sales dropped in January, as high mortgage rates and rising home prices continued to squeeze buyers, according to the National Association of Realtors (NAR).
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Existing-home sales fell 4.9 percent in January to a seasonally adjusted rate of 4.08 million. Despite the month-over-month decline, sales were still 2 percent higher than a year ago, marking the fourth consecutive month of annual growth.
NAR Chief Economist Lawrence Yun pointed to mortgage rates as a key factor in the slowdown.
Lawrence Yun | NAR Chief Economist
“Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve,” Yun said. “When combined with elevated home prices, housing affordability remains a major challenge.”
As of Feb. 20, the average on the 30-year fixed-rate mortgage stood at 6.85 percent, according to Freddie Mac, slightly lower than the week prior (6.87 percent) and the previous year (6.90 percent).
At the current sales pace, the supply of unsold housing inventory rose to a 3.5-month supply, up from 3.2 months in December and three months in January 2024. According to the monthly Realtors Confidence Index, properties stayed on the market for around 41 days in January compared to 36 days the previous year.
“More housing supply allows strongly qualified buyers to enter the market,” Yun noted. “But for many consumers, both increased inventory and lower mortgage rates are necessary for them to purchase a different home or become first-time homeowners.”
In January, the median existing-home price increased in all four U.S. regions, rising 4.8 percent year over year to $396,900.
While home prices increased, sales slipped in three of four U.S. regions, while remaining flat in the Midwest. Year over year, sales rose in three regions and remained unchanged in the South.
- Northeast: Sales slipped 5.7 percent to 500,000 from December to January, up 4.2 percent from the previous year. The median price increased 9.5 percent to $475,400, up 9.5 percent from the year before.
- Midwest: Sales remained unchanged in January at one million, but were up 5.3 percent from January 2024. The median price climbed 7.2 percent to $290,400, up 7.2 percent from the previous year.
- South: Sales fell 6.2 percent from December to 1.83 million, unchanged from the year before. The median price rose 3.5 percent to $356,300, up 3.5 percent from January 2024.
- West: Existing-home sales fell 7.4 percent in January to 750,000, up 1.4 percent from a year ago. The median price jumped to $614,200, up 7.4 percent from the previous year. from January 2024.
Despite the recent sales dip, some experts anticipate a spring rebound, especially in Sunbelt markets.
Odeta Kushi | First American Financial Corp. Deputy Chief Economist
“The housing market’s new-found resilience is due to higher inventory levels, with active and new inventory up 17 percent and 4 percent, respectively, from a year ago,” First American Financial Corp. Deputy Chief Economist Odeta Kushi explained.
“Inventory is expected to continue trending higher, potentially giving buyers more choices and negotiating power. Markets with more new-home construction and inventory will see greater affordability relief and increased sales — conditions that have been prevalent in Sunbelt markets.”
