“Housing affordability remains a challenge,” says the Chief Economist of the National Association of Realtors.
Existing US home sales fell sharply in January as mortgage rates rose and high home prices heavier on demand with the 2025 kickoff.
Market estimates suggest that home resale fell 1.7% to 4.16 million units.
The median existing home sales prices have increased by 4.8% from a year ago to $396,900. This represents the 19th month of price rise compared to the previous year.
The decline in sales activity was widespread, with single-family homes and condominium transactions falling 5.2% and 2.4% respectively. Single-family home prices rose 5% year-on-year to $402,000, while existing regional prices rose 2.9% from January 2024 to $349,500.
Home inventory improved last month, rising nearly 17% from a year ago to 1.18 million units. Furthermore, at current sales activity rates, unsold stocks will be supplying 3.5 months from the three months in January 2024.
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“More housing supply allows qualified buyers to enter the market,” Lawrence Yun, chief economist at the National Association of Realtors, said in a statement. “But for many consumers, both an increase in inventory and a lower mortgage rate are necessary to buy another home or become a first-time homeowner.”
Yoon pointed out that the combination of rising mortgage rates and home prices has “home affordability remains a challenge.”
Mortgage market status
The US mortgage market has been accelerating since September 2024. However, after surpassing 7% in mid-January, fixed-rate mortgages on average have eased slightly.
“Mortgage fees have dropped slightly this week,” Freddie Mac’s chief economist Sam Carter said in a statement.
“The 30-year fixed-rate mortgage stayed at just under 7% for five consecutive weeks, with less than 20 basis points fluctuating during that time. This stability is expected to be a potential one as we approach the spring home-viewing season. It continues to be a forewarned for buyers and sellers.”
A similar trend was observed in alternative studies.
Joel Kang, assistant chief economist at the Mortgage Bankers Association, said home buyers are reluctant to jump into the real estate market while the market shrugs from hotter than expected inflation data.
“Even with the decline in mortgage rates, the 30-year fixed mortgage rate has dropped to 6.93%, and mortgage applications have declined to the slowest pace since the start of the year,” Kang said. “Buyers remained on the fence, so purchase requests fell that week, but loosening inventory could help support activities in the coming months.”
Mortgage rate tracks the benchmark 10-year Treasury yield. This has increased over the past few months amid concerns about stickiness and stubborn inflation, tougher monetary policy and fiscal policy.
A home under construction in California Valley Center on June 3, 2021. Mike Blake/Reuter
The annual inflation rate rose for the fourth consecutive month, at 3% in January (highest since June 2024).
Industry sentiment snapshot
Home builders’ trust fell to a lowest level in January in five months, and was overwhelmed by concerns about high housing costs, rising mortgage rates and presidential tariff plans.
“The builders retain hopes for regulatory reform, policy uncertainty and cost factors, particularly for regulatory reform, policy uncertainty and cost factors, but created a reset to expectations for 2025 with the latest HMI (Housing Market Index)” HomeBuilder.
Industry sentiment has skyrocketed following the November 2024 presidential election, but withdrew in fear surrounding higher tariffs and harsher levels of immigration, according to Bill Adams, the Bank of Comerica.
“Comerica is projecting moderate growth in home construction in 2025, because Americans spend more time at home than before the pandemic, and supply is slower to keep up with lifestyle changes. That’s because,” Adams told the Epoch Times in a memo sent by email. “However, tariffs, immigration restrictions and high mortgage rates are risks of shortcomings to industry outlook.”
Today there is more total inventory, and over three years the new list has skyrocketed to the highest level, surged by over 4%. Additionally, a typical home for sale takes 57 days to the longest span in five years, making buyers more negotiating power.
