Key Takeaways
- Existing home sales surprisingly fell in January as elevated mortgage rates and high prices kept buyers away.
- The sales drop comes despite an inventory improvement, as more homes are listed for sale.
- Economists said persistently high rates make it a difficult market for homebuyers and sellers.
More properties are for sale in a housing market that has been clamoring for more inventory—but elevated mortgage rates and persistently high prices are still keeping buyers away.
Existing-home sales in January were down 4.9% from December’s levels, according to National Association of Realtors (NAR) data. That was fewer sales than expected by economists surveyed by The Wall Street Journal and Dow Jones Newswires.
The declining sales come despite there being more houses on the market. Inventory increased by 3.5% from last month, and the 1.18 million available units for sale were 16.8% higher than a year ago.
But while inventory is improving, mortgage rates and home prices are not. The median price for an existing home was up almost 5% from a year ago at $396,900. Mortgage rates hover near their historically elevated levels of just under 7%.
“More housing supply allows strongly qualified buyers to enter the market,” said NAR Chief Economist Lawrence Yun. “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.”
The Housing Market is in a Rut
It’s the first time in four months that sales have slowed, leading some economists to ask whether housing market momentum is slowing.
“Potential buyers are reluctant to make a purchase amid elevated mortgage rates and the poorest affordability in decades,” wrote BMO Senior Economist Priscilla Thiagamoorthy. “And, would-be sellers are unwilling to give up favorable mortgage terms acquired during the pandemic when rates were at rock-bottom.”
Other indicators also point to a slow housing market, including a similar decline in pending home sales and lackluster mortgage application volume. Economists said it’s unlikely that home prices and mortgage rates will let up any time soon.
“Increases in supply may keep a floor under sales, but unless prices soften significantly, which we don’t expect, many buyers will continue to be priced out of the market,” said Nancy Vanden Houten, Oxford Economics lead U.S. economist.
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