Summary
Existing home sales dropped sharply in January, according to the National Association of Realtors, even as mortgage rates continued easing. The NAR said sales fell 8.4% from December to a seasonally adjusted annual rate of 3.91 million units, the largest monthly decline in nearly four years.
Lawrence Yun, the NAR’s chief economist, linked the January decrease to conditions that made it harder to gauge the underlying trend, citing “the below-normal temperatures and above-normal precipitation” that month. He also said the slowdown reflected ongoing affordability pressure for renters trying to become homeowners, not a shift toward widespread distress in mortgage markets.
The drop in transactions underscored how prices and affordability have continued to constrain demand. NAR reported that the national median sales price increased 0.9% year over year in January to $396,800, extending a run of annual price gains into its 31st straight month.
NAR also said January’s sales pace was down 4.4% compared with the same month a year earlier, and it fell short of the 4.105 million-unit pace economists expected, according to FactSet. The West recorded the biggest annual and monthly decline, which AP reported was notable because it was less affected by the winter storm that hit other parts of the country.
At the same time, mortgage-rate movements offered some support to buyers but not enough to offset the price barrier. Freddie Mac reported that the average rate on a 30-year mortgage briefly dropped to 6.06% last month, its lowest level since September 2022, and that the rate then inched higher to just above 6% by the following week. The 30-year fixed rate in the FRED vintage for this article’s date was 6.09%.
Housing inventory rose in the background of the sales decline, leaving more homes on the market longer. NAR said there were 1.22 million unsold homes at the end of January, down 0.8% from December but up 3.4% from January 2025, and translating into a 3.7-month supply. Yun said the market still showed “minimal foreclosures” as housing wealth continued building, while renters faced difficulty converting to homeownership.
Affordability constraints also show up in who bought homes. NAR said first-time buyers accounted for 31% of purchases in January, compared with 40% historically, reflecting how limited equity can make monthly payments harder to manage for households seeking their first home.
Uncertainty around jobs also weighed on buying plans, AP reported. NAR cited signs that job openings fell in December to the lowest level in more than five years, and it noted that hiring strength in January was offset by government revisions that reduced total jobs created last year to the weakest since 2020.
With more inventory expected to appear ahead of spring, market expectations turned toward improved negotiation room. Lisa Sturtevant, chief economist at Bright MLS, said buyers would find “a more favorable market” as the spring season approached, pointing to more inventory, lower rates, and slower price growth that could give buyers additional leverage.
Mortgage rates have been trending lower for months, which helped lift sales in December. But with January ending well below the pace that is considered historically normal—around 5.2 million units annually—NAR’s figures suggest that easing financing costs are not yet fully translating into a broad rebound in existing-home demand.