Can the housing market recover? Sales dip shows impact of high rates
Existing-home sales fell in January, declining 4.9% from December to a seasonally adjusted annual rate of 4.08 million, according to the National Association of Realtors (NAR). However, year-over-year sales rose 2.0%, marking the fourth consecutive month of annual gains.
The housing market continues to grapple with affordability challenges as mortgage rates remain steady and home prices climb. The median existing-home sales price reached $396,900 in January, reflecting a 4.8% increase from the previous year and extending a 19-month streak of year-over-year price gains.
“Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve,” said NAR chief economist Lawrence Yun. “When combined with elevated home prices, housing affordability remains a major challenge.”
Inventory increases
Total housing inventory rose 3.5% from December to 1.18 million units, a 16.8% increase from one year ago. The supply of unsold homes now stands at 3.5 months’ worth at the current sales pace, up from 3.2 months in December and 3.0 months in January 2024.
“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.”
Market conditions and buyer activity
Homes typically remained on the market for 41 days in January, longer than the 35 days reported in December. First-time buyers accounted for 28% of purchases, down from 31% the prior month but unchanged from January 2024. Cash sales made up 29% of transactions, while individual investors and second-home buyers comprised 17% of sales.
Distressed sales, including foreclosures and short sales, remained minimal at 3% of all transactions, consistent with prior months.
Mortgage rates and regional performance
The 30-year fixed-rate mortgage averaged 6.85% as of Feb. 20, according to Freddie Mac. This figure is slightly lower than the previous week’s 6.87% and the 6.90% recorded a year ago.
Existing-home sales varied by region. The Midwest held steady at an annual rate of one million sales, while the Northeast saw a 5.7% monthly decline but a 4.2% increase from the prior year. The South experienced a 6.2% monthly drop with no annual change, and the West saw the largest monthly decrease at 7.4%, though sales remained 1.4% higher than last year.
Home prices increased across all regions, with the Northeast seeing the highest annual price jump at 9.5%, followed by the Midwest at 7.2%, the West at 7.4%, and the South at 3.5%.
Single-family and condo market trends
Single-family home sales fell 5.2% in January to an annual rate of 3.68 million but remained 2.2% higher than the previous year. The median price for single-family homes was $402,000, a 5.0% increase from January 2024.
Meanwhile, condominium and co-op sales dropped 2.4% to 400,000 units, remaining unchanged from last year. The median price for existing condos climbed to $349,500, a 2.9% increase from January 2024.
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