“For Sale” and “Sale Pending” signs in the West Seattle neighborhood of Seattle, Washington, US, on Tuesday, June 18, 2024. The National Association of Realtors is scheduled to release existing homes sales figures on June 21.
David Ryder | Bloomberg | Getty Images
High mortgage rates and elevated home prices combined to crush home sales in January.
Pending sales, which are based on signed contracts for existing homes, dropped 4.6% from December to the lowest level since the National Association of Realtors began tracking this metric in 2001. Sales were down 5.2% from January 2024. These sales are an indicator of future closings.
“It is unclear if the coldest January in 25 years contributed to fewer buyers in the market, and if so, expect greater sales activity in upcoming months,” said Lawrence Yun, NAR’s chief economist. “However, it’s evident that elevated home prices and higher mortgage rates strained affordability.”
While weather may have been a factor, sales rose month-to-month in the Northeast and fell in the West, which would have seen the smallest impact of cold temperatures. Sales fell hardest in the South, which has been the most active region for home sales in recent years.
Mortgage rates were also higher in January. The average rate on the popular 30-year fixed loan spent the first half of December below 7% but then began rising. It was solidly above 7% for all of January, according to Mortgage News Daily.
Home prices have been easing over the last few months in certain areas, with more sellers cutting prices, but nationally they are still higher than they were a year ago.
This drop in sales also came despite the fact that the inventory of homes for sales in January, including homes that were under contract but not yet sold, increased by 17% compared with last year, growing on an annual basis for the 14th month in a row, according to Realtor.com.
“More for-sale inventory has the potential to generate more contract signings, but climbing home supply is not evenly distributed across the U.S.,” noted Hannah Jones, an economist with Realtor.com. “Moreover, many areas with high demand see relatively low for-sale inventory, which limits progress towards more home sales.”