## January Home Sales Plummet as High Rates and Prices Bite

The housing market experienced a significant downturn in January, as high mortgage rates and elevated home prices combined to suppress sales activity. Pending home sales, which reflect signed contracts for existing homes, plummeted by 4.6% from December to reach the lowest level since the National Association of Realtors (NAR) began tracking this metric in 2001. Year-over-year, sales were down a substantial 5.2% compared to January 2024.

Impact of Economic Factors on Home Sales

Lawrence Yun, NAR's chief economist, attributed the decline to the strained affordability caused by elevated home prices and higher mortgage rates. While he acknowledged that the coldest January in 25 years may have played a role in reducing buyer activity, he anticipates an uptick in sales in the coming months. Notably, despite the weather conditions, sales increased month-to-month in the Northeast but fell in the West, suggesting that factors beyond temperature fluctuations were at play.

The South, which has been a hotbed for home sales in recent years, witnessed the most significant drop in sales. This regional disparity underscores the complex interplay of economic and seasonal influences on the housing market.

Mortgage Rate Trends and Home Prices

Mortgage rates escalated in January, with the average rate on the popular 30-year fixed loan consistently above 7% throughout the month, according to Mortgage News Daily. This surge in borrowing costs further dampened buyer demand. Although home prices have shown some easing in certain areas, with more sellers adjusting their asking prices, nationally they remain higher than a year ago, contributing to affordability challenges.

Inventory Levels and Regional Variations

Despite the decline in sales, the inventory of homes for sale increased by 17% compared to last year in January. This marks the 14th consecutive month of annual growth in inventory, according to Realtor.com. However, Hannah Jones, an economist with Realtor.com, pointed out that this increase in supply is not evenly distributed across the U.S. In areas with high demand, for-sale inventory remains relatively low, limiting progress towards greater home sales.