Existing-home Sales Slow In January As Affordability Challenges Persist

Existing-home sales started the year on a down note, dropping 4.9% month over month to a seasonally adjusted annual rate of 4.08 million in January, according to data released Friday by the National Association of Realtors (NAR).

Despite the monthly decrease, existing-home sales were up 2% compared to the same month last year, marking the fourth consecutive month of annualized increases. 

NAR chief economist Lawrence Yun attributed the monthly decline in sales to continued affordability challenges. 

“Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve,” Yun said in a statement. “When combined with elevated home prices, housing affordability remains a major challenge.”

Illustrating some of these hurdles is the 4.8% annual increase recorded in the median sale price, which rose to $396,900 in January. 

With sales slowing in January, the inventory of unsold existing homes had a chance to rise slightly, increasing 3.5% month over month to 1.18 million units. On a yearly basis, this marks a 16.8% bump in inventory. The inventory level represents 3.5 months of supply at the current sales pace. 

“More housing supply allows strongly qualified buyers to enter the market,” Yun added. “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.”

Reflecting the increase in inventory, homes typically remained on the market for 41 days in January, up from 35 days in December and 36 days a year ago. 

The share of cash sales rose one percentage point month over month to 29% in January, but this is down from 32% in January 2024. Meanwhile, the share of distressed sales, foreclosures and short sales remained virtually unchanged from both one month and one year ago at 3%. 

Regionally, existing-home sales fell on a monthly basis in the Northeast (down 5.7% to an annualized rate of 500,000 homes), the South (down 6.2% to a pace of 1.83 million homes) and the West (down 7.4% to a pace of 750,000 homes).

The Midwest stayed steady month over month at an annual rate of 1.3 million sales. Year over year, existing-home sales were up in the Northeast (+4.2%), Midwest (+5.3%) and West (+1.4%) while remaining flat in the South.