High mortgage rates and elevated home prices combined to significantly reduce home sales in January. Pending sales, which are based on signed contracts for existing homes, fell by 4.6% from December, marking the lowest level since the National Association of Realtors (NAR) began tracking this metric in 2001. Compared to January 2024, sales were down by 5.2%. These pending sales serve as an indicator of future closings. Lawrence Yun, NAR’s chief economist, noted that it is unclear whether the coldest January in 25 years contributed to the decline in buyers, but he acknowledged that higher mortgage rates and home prices have clearly affected affordability. While weather may have played a role, sales increased month-over-month in the Northeast and decreased in the West, which experienced milder weather. The South saw the sharpest decline in sales, despite being the most active region for home sales in recent years. Mortgage rates were also higher in January, with the average rate on the popular 30-year fixed loan remaining above 7% throughout the month, according to Mortgage News Daily. Although home prices have eased in certain areas over the past few months, with more sellers reducing prices, they remain higher nationally compared to a year ago. This decline in sales occurred despite a 17% annual increase in the inventory of homes for sale in January, including homes under contract but not yet sold, marking the 14th consecutive month of annual growth, according to Realtor.com. Danielle Hale, chief economist for Realtor.com, noted that while more inventory could lead to more contract signings, the distribution of home supply is uneven across the U.S., with high-demand areas seeing relatively low inventory, limiting progress toward increased home sales. — news from CNBC
