A “For Sale” sign on a house in Philadelphia, Pennsylvania, US, on Friday, Aug. 16, 2024.
Joe Lamberti | Bloomberg | Getty Images
The U.S. housing market continues to weaken, as potential buyers face stubbornly high mortgage rates, elevated prices and limited supply of listings.
Sales of previously owned homes fell 4.9% in January from the prior month to 4.08 million units on a seasonally adjusted, annualized basis, according to the National Association of Realtors. Analysts were expecting a 2.6% decline.
Sales were 2% higher than January 2024, but are still running at a roughly 15-year low.
This read is based on closings, so contracts likely signed in November and December when mortgage rates came down from over 7% to the 6% range.
“Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve,” said Lawrence Yun, chief economist for the NAR. “When combined with elevated home prices, housing affordability remains a major challenge.”
There were 1.18 million homes for sale at the end of January, an increase of 3.5% from December and 17% from January 2024. Although inventory is gaining, it is still at a 3.5-month supply at the current sales pace. A six-month supply is considered balanced between buyer and seller.
The average home for sale last month spent 41 days on the market. That is the longest since January 2020, pre-Covid.
Tight supply continues to pressure prices. The median price of a home sold in January was $396,900, up 4.8% from the year before and the highest price ever for the month of January. All four regions tracked by NAR saw price gains. About 15% of homes sold above list price, virtually unchanged from 16% in both the pervious month and the year-earlier period.
“More housing supply allows strongly qualified buyers to enter the market,” Yun added. “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.”
All-cash offers made up 29% of sales, which is historically high but down from 32% the year before. First-time buyers are still struggling, accounting for 28% of sales. That share is unchanged from a year ago, but is well below historical averages of about 40%.
Home sales are faring significantly better at higher price points and falling at lower price points. For example, sales of homes priced between $100,000 and $250,000 dropped 1.2% year over year, while homes priced over $1 million rose nearly 27% from the year before.
Realtors are reporting that buyer traffic in January was weak.
“Realtors are putting more signs up, but the buyers are not coming,” said Yun.
