Existing-Home Sales Fall in January as Days on Market Widen

Key takeaways:

• January existing-home sales decreased 4.9% month-over-month and rose 2% annually
• The nationwide median existing-home sales price hit $396,900 in January — a 4.8% gain from the previous year
• The inventory of unsold existing homes increased 3.5% month-over-month and grew 16.8% year-over-year to a 3.5-month supply at the current pace of sales

Existing home sales grow

Existing-home sales decreased 4.9% in January compared to November and 9.3% from the year before, according to the National Association of Realtors (NAR).

The median existing-home sales price reached $396,900. While that dipped from $404,400 in December, that increased 4.8% annually from $378,600 and marked the 19th straight month of yearly gains.

“Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve. When combined with elevated home prices, housing affordability remains a major challenge,” said NAR Chief Economist Lawrence Yun. “For many consumers, both increased inventory and lower mortgage rates are necessary for them to purchase a different home or become first-time homeowners.”

Regionally, the South had the most existing-home sales in November, with an annual rate of 1.83 million units. That stayed flat from the year prior. The median price grew 3.5% annually to reach $356,300.

The Midwest’s 1 million units came next, up 5.3% year-over-year. Its median price grew 7.2% to $290,400.

The West accounted for 750,000 existing sales, decreasing 1.4% from one year ago. Typically the costliest part of the country, the median price increased annually by 7.4% to $614,200.

The Northeast’s 500,000 sales grew 4.2% annually. The median price jumped 9.5% from a year earlier to $475,400.

Factors influencing the market

NAR Chief Economist Lawrence Yun has pointed to two significant factors impacting existing-home sales: low for-sale inventory and high mortgage rates.

Given the ongoing tight supply, properties on the market still receive multiple offers, especially starter- and mid-priced homes, he said.

“The housing market continues to unthaw slowly amid considerable affordability challenges brought on by high interest rates and rising homeownership expenses,” said Selma Hepp, chief economist at CoreLogic. “Lower mortgage rates later this year will provide a breather, though the average potential home buyer continues to maintain a wait-and-see approach. Improvements in existing for-sale inventory are critical and will help thaw out sales further.”

Housing inventory reached 1.18 million units at the end of January, up 3.5% monthly and 16.8% year-over-year. Unsold homes sit at a 3.5-month supply at the current sales pace, above December’s 3.2 months and January 2024’s 3.0 months. Traditionally, six months worth of inventory defines a balanced housing market.

Moreover, time on market expanded to 41 days in January from 35 days in December and 36 days the year before. All-cash buyers accounted for 29% of existing-sales, up from 28% the pervious month and down from 32% the year prior.

Navigating the housing market

Embarking on the journey to homeownership is an exciting and significant step in one’s life. To help you navigate this path successfully, we’ve compiled three practical tips:

1. Stay on top of housing inventory: Keep an eye on changes in inventory levels, as this can impact your choices and negotiation power. Be ready to act when the right opportunity arises.
2. Assess your budget and financing options: With low housing affordability being a factor in declining sales, it’s crucial to evaluate your financial circumstances. Explore different financing options and ensure that you find a home that aligns with your budget and long-term financial goals.
3. Be proactive and act quickly: When you find a home that meets your criteria, be proactive and act quickly to avoid missing out. The best way to do so is by securing a mortgage prequalification in advance.

The bottom line

As a home buyer, navigating the current real estate market can feel overwhelming at times. But armed with the right knowledge, you can approach the process with confidence.

Stay informed about the latest trends, assess your budget, explore down payment assistance programs in your area, and act quickly when you find the right home.