Home sales drop sharply as prices hit an all-time high for January

The U.S. housing market continues to weaken, as potential consumers face stubbornly high mortgage charges, high prices and restricted provide of listings.

Sales of previously-owned properties fell 4.9% in January from the prior month to 4.08 million items on a seasonally-adjusted, annualized foundation, in accordance with the Nationwide Affiliation of Realtors. Analysts have been anticipating a 2.6% decline.

Sales have been 2% increased than January 2024, however are nonetheless operating at a roughly 15-year low.

This learn is predicated on closings, so contracts doubtless signed in November and December when mortgage charges got here down from over 7% to the 6% vary.

“Mortgage charges have refused to budge for a number of months regardless of a number of rounds of short-term rate of interest cuts by the Federal Reserve,” mentioned Lawrence Yun, chief economist for the NAR. “When mixed with elevated residence prices, housing affordability stays a significant problem.”

There have been 1.18 million properties for sale on the finish of January, an improve of three.5% from December and 17% from January 2024. Though stock is gaining, it’s nonetheless at a 3.5-month provide on the present sales tempo. A 6-month provide is taken into account balanced between purchaser and vendor.

The typical residence for sale final month spent 41 days in the marketplace. That’s the longest since January 2020, pre-Covid.

Tight provide continues to stress prices. The median value of a house bought in January was $396,900, up 4.8% from the 12 months earlier than and the best value ever for the month of January. All 4 areas tracked by NAR noticed value positive aspects. About 15% of properties bought above checklist value, nearly unchanged from 16% in each the pervious month and the year-earlier interval.

“Extra housing provide permits strongly certified consumers to enter the market,” Yun added. “However for many customers, each elevated stock and decrease mortgage charges are mandatory for them to buy a special residence or turn out to be first-time owners.”

All-cash gives made up 29% of sales, which is traditionally high however down from 32% the 12 months earlier than. First-time consumers are nonetheless struggling, accounting for 28% of sales. That share is unchanged from a 12 months in the past, however is nicely beneath historic averages of about 40%.

Home sales are faring considerably higher at increased value factors and falling at cheaper price factors. For instance, sales of properties priced between $100,000 and $250,000 dropped 1.2% year-over-year, whereas properties priced over $1 million rose practically 27% from the 12 months earlier than.

Realtors are reporting that purchaser site visitors in January was weak.

“Realtors are placing extra indicators up, however the consumers usually are not coming,” mentioned Yun.