January Home Sales Fall as High Mortgage Rates, Prices Freeze Out Buyers

Sales of previously occupied U.S. homes fell in January as rising mortgage rates and prices put off many would-be homebuyers despite a wider selection of properties on the market.

The National Association of Realtors reported that sales fell 4.9% last month from December to a seasonally adjusted annual rate of 4.08 million units. While sales rose 2% compared with January last year, the latest home sales fell short of the 4.11 million pace economists were expecting.

Home Prices Continue to Rise

Home prices increased on an annual basis for the 19th consecutive month. The national median sales price rose 4.8% in January from a year earlier to $396,900, according to the National Association of Realtors.

Mortgage Rates Refuse to Budge

“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, NAR’s chief economist. “When combined with elevated home prices, housing affordability remains a major challenge.”

Homebuyers Struggle to Afford

The average rate on a 30-year mortgage briefly fell to a 2-year low last September, but has been mostly hovering around 7% this year, according to Freddie Mac. That’s more than double the 2.65% record low the average rate hit a little over four years ago.

Low Mortgage Applications

Home loan applications fell 5.5% last week from the previous week to the lowest level since the start of the year, according to the Mortgage Bankers Association.

Inventory of Homes for Sale Rises

There were 1.18 million unsold homes at the end of last month, up 3.5% from December and up 16.8% from January last year, NAR said. That translates to a 3.5-month supply at the current sales pace, up from a 3.2-month pace in December and a 3-month pace at the end of January last year.

Sellers Still Have the Edge

Homes typically remained on the market for 41 days in January before selling, the longest since before the pandemic. In December, homes were typically on the market 35 days before they sold.

Constrained Supply

Despite the improved inventory, Yun expects there could be 1.5 million homes on the market when the spring homebuying season gets going, but noted the U.S. needs there to be closer to 2 million properties for sale.

Conclusion

January’s home sales fell as high mortgage rates and prices put off many would-be homebuyers, despite a wider selection of properties on the market. The National Association of Realtors reported that sales fell 4.9% last month from December to a seasonally adjusted annual rate of 4.08 million units. Home prices continue to rise, and the supply of homes for sale remains constrained, making it difficult for many prospective homebuyers to find a home that fits their budget.

FAQs

* What was the seasonally adjusted annual rate of home sales in January?
+ 4.08 million units
* How much did home prices increase on an annual basis in January?
+ 4.8%
* What is the current average rate on a 30-year mortgage?
+ 7%
* What is the current supply of homes for sale?
+ 3.5-month supply
* How long did homes typically remain on the market before selling in January?
+ 41 days