Weather, tight inventory and cautious buyers weighed on January’s housing numbers
Existing-home sales in the United States fell sharply in January, interrupting a fragile late‑2025 recovery and underscoring how thin inventory continues to offset improving affordability for would‑be buyers and their lenders.
The National Association of Realtors (NAR) reported that existing-home sales fell 8.4% in January to a seasonally adjusted annual rate of 3.91 million, 4.4% lower than a year earlier.
At the same time, the Housing Affordability Index rose for the seventh straight month to 116.5, while the median existing-home price edged up 0.9% year over year to $396,800.
The pullback followed a 5.1% gain in December and modest increases through the fall, when lower mortgage rates helped push existing-home sales to 4.13 million in November and 4.06 million in September. Those months hinted at a thaw in demand as the average 30‑year fixed rate drifted lower, but January’s setback suggested buyers remained sensitive to both price and supply, with inventory at 1.22 million units, or 3.7 months’ supply.
“The decrease in sales is disappointing. The below-normal temperatures and above-normal precipitation this January make it harder than usual to assess the underlying driver of the decrease and determine if this month’s numbers are an aberration,” said NAR chief economist Lawrence Yun.
“Affordability conditions are improving, with NAR’s Housing Affordability Index showing that housing is the most affordable it’s been since March 2022. This is due to wage gains outpacing home price growth and mortgage rates being lower than a year ago. However, supply has not kept pace and remains quite low.”
“Due to low supply, the median home price reached a new high for the month of January,” Yun added. “Homeowners are in a financially comfortable position as a result. Since January 2020, a typical homeowner would have accumulated $130,500 in housing wealth.”
Jeff Ostrowski, housing market analyst at Bankrate, tied those dynamics to a still‑tight resale pipeline. “Owners aren’t keen to put their homes on the market, as the mortgage rate lock-in effect remains in place and soft prices in some areas causes sellers to pull their homes off the market,” he said. “And first-time buyers aren’t feeling motivated to jump in.”
Affordability improved across all regions, with the index rising between 9% in the Northeast and 17.1% in the West. However, sales declined month over month in every region, led by a 10.3% drop in the West and a 9.0% decrease in the South.
Single‑family sales fell 9.0% to an annual rate of 3.53 million, while condo and co‑op sales slipped a milder 2.6% to 380,000.
Those cross‑currents echoed recent patterns. “As anticipated, falling mortgage rates are lifting home sales,” Yun said in October, when September existing-home sales rose amid easing borrowing costs and a 14% jump in available inventory. “Improving housing affordability is also contributing to the increase in sales.”
In November, as rates eased further, “existing-home sales increased for the third straight month due to lower mortgage rates this autumn,” Yun said.
Mortgage rates remained lower than a year earlier, with the average 30‑year fixed rate at about 6.10% in January, compared with nearly 7% at points in 2025. Freddie Mac has highlighted a steady drift down in borrowing costs, including a mid‑January move to just above 6%, their lowest level in more than three years.
Meanwhile, Ostrowski cautioned that Federal Reserve moves and White House pledges offered less relief than headlines suggested.
“The Fed doesn’t directly control mortgage rates, and that’s especially true now,” he said. “For example, when the Federal Reserve cut rates in late 2024, mortgage rates actually rose.”
He added that while President Donald Trump has floated ideas “to make homes more affordable,” including 50‑year mortgages and opening federal land for building, “the reality is that most political decisions about housing supply are made by local government, and not at the federal level.”
For originators working with frustrated would‑be buyers, Ostrowski urged a focus on fundamentals rather than chasing every rate headline.
“If you’re emotionally and financially ready to buy, just do it – don’t get too caught up in the latest moves in home prices or mortgage rates,” he said.
“Make sure to research down payment assistance, and if you don’t have 20% to put down, don’t be afraid to buy with 5% or 10% down.”
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