In January, sales of pre-owned homes increased by 3.1% to reach 4 million units on a seasonally adjusted annualized basis, as reported by the National Association of Realtors. However, this marked a 1.7% year-over-year decline. The figures are based on closings, indicating that the contracts were likely signed in November and December. During that period, mortgage interest rates declined from their October peak of 8% to a low of around 6.6% in mid-December. Presently, rates have risen back to over 7%, according to Mortgage News Daily.
Lawrence Yun, the chief economist at the NAR, noted that despite home sales remaining lower than in previous years, January’s monthly gain signifies a positive shift in supply and demand. Listings saw a modest increase, and homebuyers are taking advantage of lower mortgage rates compared to the late months of the previous year.
In January, the inventory of homes for sale rose to 1.01 million units, a 3.1% increase from January 2023, but still maintaining a low three-month supply. A balanced market typically has a six-month supply between buyer and seller.
The pressure on home prices persists due to this dynamic. The median price for existing homes of all types in January was $379,100, reflecting a 5.1% increase from the previous year and setting an all-time high for January.
All U.S. regions experienced price increases, with 16% of homes selling above their list price. Multiple offers, especially on mid-priced homes, were common, and a notable 32% of deals were all-cash transactions. This marks the highest level in nearly a decade.
First-time buyers accounted for only 28% of sales, a departure from the historical average of around 40%. The scarcity of lower-priced homes for sale is particularly impacting this group.
While lower mortgage rates contributed to the boost in January sales, the market is currently facing renewed challenges with the return of higher interest rates. A separate report from Redfin revealed a 10% year-over-year increase in new listings during the four weeks ending on Feb. 18. However, signed contracts were down by 7% compared to the previous year, indicating the market’s sensitivity to fluctuating mortgage rates.
