Sales of previously occupied US 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.
Sales fell 4.9% last month from December to a seasonally adjusted annual rate of 4.08 million units, the National Association of Realtors said Friday.
Sales rose 2% compared with January last year, marking the fourth straight annual increase.
The latest home sales, however, fell short of the 4.11 million pace economists were expecting, according to FactSet.
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.
“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.”
The US housing market has been in a sales slump dating back to 2022, when mortgage rates began to climb from pandemic-era lows.
Sales of previously occupied US homes fell last year to their lowest level in nearly 30 years.
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.
That’s more than double the 2.65% record low the average rate hit a little over four years ago.
Rising home prices and elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have kept many prospective home shoppers on the sidelines, especially first-time buyers who don’t have equity from an existing home to put toward a new home purchase.
They accounted for 28% of all homes sold last month, matching the share in January 2024, but down from 31% in December.
The annual share of first-time buyers fell last year to a record-low 24%. It’s been 40% historically.
Home shoppers who could afford to buy at current mortgage rates or pay all-cash to sidestep financing altogether had more homes to choose from last month.
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.
Traditionally, a 5- to 6-month supply is considered a balanced market between buyers and sellers.
One reason the inventory of homes for sale has been rising is properties are taking longer to sell.
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.
Despite the improved inventory, sellers still generally have the edge over buyers.
Some 15% of homes purchased last month sold for above their list price.
And, on average, homes received 2.6 offers last month, Yun said.
Mortgage rates are not expected to come down significantly in the first half of the year, but slight dips could prompt some eager buyers to act, taking advantage of the growing number of homes on the market.”
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