In January, the landscape of existing home sales in the United States encountered a significant contraction, as data from the National Association of Realtors (NAR) revealed a drop exceeding initial forecasts. Sales plummeted by 4.9% on a month-to-month basis, settling at a seasonally adjusted annual rate of 4.08 million units.
Analysts had predicted a more modest decline of 2.6%, based on a Bloomberg survey. Notably, when observing the annual figures, home sales exhibited a slight 2% increase compared to January of the previous year. NAR's Chief Economist, Lawrence Yun, revealed insights on this trend, stating, "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." In January, the Federal Reserve opted to maintain its benchmark lending rate steady following three consecutive reductions. Current mortgage conditions reflect a complicated scenario; as of Thursday, the average rate for a 30-year fixed mortgage stood at 6.85%, a minor decrease from 6.87% the week prior, yet an increase from 6.08% recorded late in September, according to Freddie Mac data. Additionally, existing home prices showcased a substantial year-over-year rise, with the median price climbing by 4.8% to reach $396,900 in January.
This marks the 19th consecutive month of annual gains, illustrating the persistent pressure on home affordability for potential buyers. Breaking down sales further, single-family homes recorded an adjusted annual rate of 3.68 million units in January, representing a 5.2% drop from December but reflecting a 2.2% increase compared to the previous year.
Meanwhile, sales of existing condominiums and cooperative units totaled 400,000, reflecting a 2.4% decrease sequentially, yet maintaining parity with figures from one year ago, as noted by the NAR. Another significant highlight is the total housing inventory, which increased by 3.5% from December 2022 and 17% when viewed year-over-year.
Yun emphasized the impact of the improved housing supply, stating, "More housing supply allows strongly qualified buyers to enter the market. 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." In a broader context, it was reported that U.S.
housing starts fell more than anticipated last month, with declines recorded in both single-family and multifamily building projects, as revealed by government data shared on Wednesday..