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Stagnation in Home Sales Amid High Prices and Mortgage Rates

Recent data shows a significant downturn in home sales as the National Association of Realtors (NAR) prepares to release its latest figures on existing home sales.

In January, pending home sales—a measure of signed contracts for existing properties—declined by 4.6% compared to December, reaching the lowest point since the NAR began tracking this statistic in 2001. Year-over-year, sales decreased by 5.2% from January 2024. This indicator is considered a crucial predictor of impending closings.

Lawrence Yun, the chief economist at NAR, commented on the situation: “While it’s uncertain if the frigid temperatures of January, the coldest in 25 years, had a significant impact, we may observe increased sales activity in the coming months. Nonetheless, it’s clear that high home prices combined with rising mortgage rates have made housing less affordable.”

Geographically, the impact of weather on sales varied; while the Northeast experienced a month-over-month increase in sales, the West saw a decline, despite being less affected by harsh winter conditions. The South, typically a hot market for real estate, faced the sharpest sales drop.

January saw mortgage rates climbing as well. After hovering below the 7% mark for much of December, the average rate for a 30-year fixed mortgage exceeded 7% throughout January, according to Mortgage News Daily.

In terms of pricing, while some regions have witnessed a slight easing, with an increase in sellers reducing their prices, overall home prices remain elevated compared to a year ago.

This significant sales decline occurred despite a 17% year-over-year increase in the inventory of homes for sale in January. This rise marks the 14th consecutive month of annual growth in housing inventory, as reported by Realtor.com.

Danielle Hale, chief economist at Realtor.com, observed, “An increase in available homes for sale can lead to more signed contracts; however, the rise in supply is not uniform across the U.S. Many high-demand areas still experience low inventory levels, which hinders the potential for increased sales.”

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