“For Sale” sign in a home in Philadelphia, Pennsylvania, USA, on Friday, August 16th, 2024.
Joe Lamberti | Bloomberg | Getty Images
The U.S. housing market continues to weaken as potential buyers are stubbornly high mortgage rates, rising prices and limited list supply.
Sales of previously owned homes fell 4.9% from the previous month, according to the National Association of Realtors. Analysts were hoping for a 2.6% drop.
Sales were 2% higher than in January 2024, but are still running at around 15 years’ lowest.
Because this read is based on the closure, the contract could be signed in November and December, when mortgage interest rates fell from over 7% to 6%.
“We’ve seen a lot of effort into making this a reality,” said Lawrence Yun, chief economist at NAR. “Coupled with rising home prices, home affordability is a major challenge.”
At the end of January, 1.18 million homes were on sale, up 3.5% from December and 17% from January 2024. Although inventory is increasing, the supply is still 3.5 months at the current sales pace. The six-month supply is considered to be balanced between the buyer and seller.
The average home for sale last month spent 41 days on the market. This is the longest since January 2020.
The strict supply continues to be priced. The median price of homes sold in January was $396,900, up 4.8% from the previous year, at the highest price in January. All four regions tracked by the NAR achieved price increases. Approximately 15% of homes sell above the price. This has not changed substantially from 16% in both the looming month and year.
“More housing supply allows qualified buyers to enter the market,” Yun added. “But for many consumers, both an increase in inventory and a lower mortgage rate are necessary to buy another home or become a first-time homeowner.”
The All-Cash offer accounted for 29% of sales. This is historically high, but is down from 32% the previous year. First-time buyers are still struggling, accounting for 28% of sales. Its share has not changed for a year ago, but is well below the historic average of around 40%.
Home sales are better at higher prices and falling at lower prices. For example, sales for homes priced between $100,000 and $250,000 fell 1.2% year-on-year, while prices above $1 million rose nearly 27% from the previous year.
Real estate agents report weaker buyers traffic in January.
“Real estate agents are putting up more signs, but buyers aren’t coming,” Yun said.
