In a notable downturn for the U.S. real estate market, home sales plummeted in January to their lowest level since 2001. This decline marks a 4.6% drop from December and a 5.2% decrease from January of the previous year. The dual forces of high mortgage rates and elevated home prices have significantly impacted affordability, contributing to this ongoing slump.
Despite some regions experiencing easing home prices over recent months, national prices remain higher than those recorded a year ago. More sellers are slashing prices in an effort to attract buyers, yet the average rate on a 30-year fixed loan remained solidly above 7% throughout January, further complicating the purchasing landscape.
"However, it's evident that elevated home prices and higher mortgage rates strained affordability." – Lawrence Yun
Inventory has shown signs of improvement, with homes for sale increasing by 17% compared to January last year. This marks the 14th consecutive month of annual inventory growth. However, the distribution of inventory growth is uneven across the United States.
"More for-sale inventory has the potential to generate more contract signings, but climbing home supply is not evenly distributed across the U.S." – Danielle Hale
Regionally, sales displayed mixed trends. The Northeast saw an uptick in month-to-month sales, while the West experienced a decline, despite its typically mild winter climate. Meanwhile, the South continues to be the most active region for home sales, although it too faces challenges due to current market conditions.
Mortgage rates played a significant role in January’s sales figures. The average rate for a 30-year fixed loan started to climb in the latter half of December, surpassing 7% and maintaining this elevated level throughout January. This increase in borrowing costs placed additional pressure on prospective buyers already grappling with high home prices.