U.S. home sales experienced a significant downturn in January, marking the largest monthly decline in nearly four years. This sharp drop occurred despite a continued easing of mortgage rates, suggesting that elevated home prices and potentially harsh winter weather kept many potential buyers on the sidelines. The slowdown indicates ongoing struggles in the housing market, even as borrowing costs decrease.
Key Takeaways
- Existing home sales fell 8.4% in January to a seasonally adjusted annual rate of 3.91 million units.
- This represents the slowest annualized sales pace in over two years and a 4.4% decrease compared to January of the previous year.
- Despite the sales slump, the national median sales price rose 0.9% year-over-year to $396,800.
- Mortgage rates, while trending lower, remain a significant affordability hurdle for many aspiring homeowners.
January Sales Decline
Sales of previously occupied homes across the U.S. saw a substantial 8.4% decrease from December to January, reaching a seasonally adjusted annual rate of 3.91 million units. This marks the most significant monthly contraction in sales in almost four years and the slowest pace in over two years. The National Association of Realtors reported that sales also declined by 4.4% when compared to January of the prior year. Economists had anticipated a higher pace, with FactSet reporting expectations of 4.105 million units.
Lawrence Yun, NAR’s chief economist, expressed disappointment with the sales figures. He noted that the severe winter weather in January made it difficult to definitively assess the underlying causes of the decline, leaving open the possibility that the numbers might be an anomaly. Sales experienced a slowdown across all regions, with the West seeing the most pronounced annual and monthly drops.
Persistent Price Growth and Affordability Issues
Despite the sharp decline in sales volume, home prices continued their upward trajectory. The national median sales price increased by 0.9% in January compared to the previous year, reaching $396,800. This marks the 31st consecutive month of annual price increases. The U.S. housing market has been grappling with a sales slump since 2022, driven by a combination of rising mortgage rates, years of rapid home price appreciation, and a persistent shortage of available homes due to a decade of below-average construction.
Mortgage Rates and Buyer Behavior
While mortgage rates have been on a downward trend for months, providing some relief, they have not been enough to overcome affordability challenges for many. The average rate for a 30-year mortgage briefly dipped to 6.06% in January, its lowest point since September 2022, though it has since inched back up. This is still nearly a full percentage point lower than a year ago. However, affordability remains a significant barrier, particularly for first-time homebuyers, who represented only 31% of sales in January, down from a historical average of 40%.
Inventory and Market Outlook
The slowdown in sales has led to a slight increase in the number of unsold homes on the market. At the end of January, there were 1.22 million homes available, a 3.4% increase from the previous year, though still significantly below pre-pandemic levels. This inventory translates to a 3.7-month supply at the current sales pace, well below the 5-to-6 month supply considered a balanced market. Experts anticipate that the upcoming spring home-buying season may offer buyers more options and negotiation power due to increased inventory and slower price growth.