Sales of existing US homes fell last month for the first time since September as the combination of high mortgage rates and prices sets a grim backdrop heading into the crucial spring selling season.
Contract closings in January decreased 4.9% to an annualized rate of 4.08 million, data released Friday by the National Association of Realtors show. The median estimate in a Bloomberg survey of economists was 4.13 million.
Sales declined the most in the West and South, which were afflicted by destructive wildfires in Los Angeles and severe winter weather, respectively. To the extent weather played a role, those sales are just a matter of timing and will probably take place in subsequent months instead, NAR Chief Economist Lawrence Yun said on a call with reporters.
The drop in sales comes after the longest stretch of gains since late 2021, which offered some hope that home buyers and sellers were getting used to high mortgage rates. Home financing costs have been hovering around 7% for a few months, and combined with elevated prices, buying a house remains out of reach for many Americans.
“Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve,” Yun said in a statement. “When combined with elevated home prices, housing affordability remains a major challenge.”
Yun said NAR is concerned about the Trump administration’s interest in privatizing mortgage giants Fannie Mae and Freddie Mac, which have been in government conservatorship since their bailouts in 2008. Releasing them from the government could lead to even higher mortgage rates, he said.
Home shoppers have had a bigger selection of properties to choose from in recent months as the so-called “lock-in effect,” in which high mortgage rates discourage homeowners from listing their homes for sale, has eased a bit. In January, the supply of previously owned homes on the market increased 3.5% from the previous month to 1.18 million houses, the highest for that month since 2020.
Even so, prices are still climbing. The median sale price climbed 4.8% from a year ago to $396,900, reflecting more activity at the higher end — especially homes priced above $1 million. Yun said that partially reflects strong performance in the stock market for higher-income buyers as well as more homes shifting into higher price brackets.
Properties stayed on the market for 41 days on average in January, the highest in five years. Yun said homes tend to sit on the market longer in January and he expects the duration to shorten by the spring.
Existing-home sales account for the majority of the US total and are calculated when a contract closes. The government will release figures on new-home sales on Wednesday.
