Existing Home Sales Extend Slump in January

Sales of existing homes continued their decline in January, marking a weak start to the year after two consecutive years of sluggish performance, The Wall Street Journal reports. This decline follows a trend of depressed sales throughout 2024, attributed to persistently high home prices and mortgage rates.

According to data released Friday by the National Association of Realtors (NAR), existing-home sales fell 4.9% month-over-month in January to a seasonally adjusted annual rate of 4.08 million, exceeding the 2.6% drop predicted by economists surveyed by The Wall Street Journal. This marks the second consecutive year in which home sales have reached their lowest point since 1995.

The combination of elevated home prices and mortgage rates, hovering near 7%, has discouraged many potential buyers. Some first-time homebuyers have been priced out of the market, while existing homeowners are reluctant to sell and forfeit their low mortgage rates.

Real estate agents are cautiously optimistic about a potential uptick in sales during the spring season, typically the busiest time for the housing market. Rising inventory, driven by sellers needing to relocate due to life changes and unable to wait for improved affordability, could contribute to increased activity.

However, economists generally anticipate mortgage rates to remain near current levels in the coming months, potentially dampening demand. Rising home insurance and property tax costs are also adding to the overall cost of homeownership.

"In the month of January, this loosening of inventory did not bring additional buyers because of the higher mortgage rates," said Lawrence Yun, NAR's chief economist. "Consumers are essentially tapped out."

Despite the monthly decline, home sales are up on an annual basis. January sales were 2% higher than a year earlier, marking the fourth consecutive month of year-over-year increases.

The number of homes for sale has also increased year-over-year, but inventory remains below typical levels, keeping home prices elevated. The national median existing-home price in January reached $396,900, a 4.8% increase from a year earlier and the highest median home price for any January on record, according to NAR.

In some major cities, the number of homes for sale is growing at a faster pace. Fourteen of the 50 largest metro areas had more inventory in January than their pre-pandemic levels, including Denver, San Antonio, and Dallas, according to Realtor.com.

"There's no doubt prices are going down," said Brent Leathwood, a real estate agent in Sarasota, Florida, to The Wall Street Journal.

Leathwood noted that demand in his area has weakened due to high insurance costs and the return of some residents who relocated to Florida during the pandemic. "Every single day my email inbox is inundated with price reductions," he said.

Buyers are now in a stronger negotiating position with more options to choose from. According to real estate brokerage Redfin, the typical home sold in the four weeks ended February 16 went for 2% below its list price, the largest discount in two years.

"We have more inventory, which is always better for buyers," said Beth Ann Clanin, a real estate agent in the Atlanta area.

Nationally, there were 1.18 million homes for sale or under contract at the end of January. This represents a 3.5% increase from December and a 16.8% increase from January 2024, according to NAR.

Chad Gardner, a resident of Lakewood, Colorado, described his frustration last year with sellers renegotiating for higher prices after offers were accepted. However, the slowdown in the market this winter changed the dynamic. "All the prices were decreasing across the board, and so it kind of added that little bit of motivation to go in," he said.

Gardner recently had an offer accepted for a one-bedroom condo for $265,000. "I am ecstatic," he said.

The typical home sold in January remained on the market for 41 days, the highest level since January 2020, indicating a slowdown in demand, according to NAR.

"I'm seeing more homes and properties just taking longer to sell," said Judah Ross, a real estate agent in the Austin, Texas, area, partially attributing this to sellers asking for too much.