Home Sales Rebounded in January After Last Year’s Sharp Decline

Drop in mortgage rates since October has made home purchasing slightly more affordable

Sales of previously owned homes rose in January from the prior month, rebounding modestly after sales last year dropped to their worst level in nearly three decades.

Mortgage rates have fallen about a percentage point since last fall, spurring some buyers to return to the market even though home prices remain near record highs.

Home sales increased 3.1% in January from the prior month to a seasonally adjusted annual rate of 4 million, the highest level since August, the National Association of Realtors said Thursday.

January existing-home sales, which make up most of the housing market, fell 1.7% from a year earlier.

“People are taking advantage of the lower interest rates” since October, said Lawrence Yun, NAR’s chief economist. Rates have ticked higher in recent weeks, which could slow some demand, he said.

Existing-home sales last year slumped to their lowest level since 1995, according to NAR. Elevated mortgage rates and high home prices forced many buyers out of the market and kept would-be sellers on the sidelines, too.

A drop in rates since October has made home purchasing slightly more affordable for buyers and spurred more home-shopping activity. The average rate on a 30-year fixed mortgage has hovered between 6.6% and 6.8% so far this year, down from a recent high of 7.79% in October, according to Freddie Mac

.But buyers are still facing an expensive market with little to choose from. The inventory of homes for sale is unusually low, because homeowners are reluctant to sell and trade in their current low mortgage rates for higher ones. The low supply of homes on the market is pushing home prices higher.

The national median existing-home price rose 5.1% in January from a year earlier to $379,100, NAR said.

Economists surveyed by The Wall Street Journal estimated sales of previously owned homes rose a seasonally adjusted 4.8% in January from December.

Homes typically go under contract a month or two before the contracts close, so the January data largely reflect purchase decisions made in November and December, when mortgage rates were falling.

Mortgage rates remain far higher than they were during the pandemic-driven housing boom due to the Federal Reserve’s efforts to curb inflation and cool the economy by raising its benchmark interest rate. At their meeting last month, Fed officials signaled concern over cutting interest rates too soon, according to meeting minutes released this week.

New listings rose in January from a year ago, a positive sign for buyers, said Orphe Divounguy, senior economist at Zillow Group. Some sellers who delayed their home sales last year due to the high mortgage rates can’t wait any longer, he said.

“This year sellers are coming back,” he said. While the inventory is still far below normal levels, he said, “we’re slowly closing the gap.”

The typical home sold in January was on the market for 36 days, up from 33 days a year earlier, NAR said.

John Howell said he started house hunting in Denver at the end of the summer, because he noticed that homes were sitting longer on the market and more sellers were reducing prices on their listings.

“Once things that looked good started lasting more than a week, it was like, ‘OK, maybe there’s room for me to get into something,’” he said.

Howell bought a two-bedroom home with a backyard in January for 2% under the listing price. “I wanted to pick a time when there was not much competition and I feel like I did that,” he said. “I’m happy with it.”

Nationally, there were 1.01 million homes for sale or under contract at the end of January, up 2% from December and up 3.1% from January 2023, NAR said. At the current sales pace, there was a 3-month supply of homes on the market at the end of January.

The share of first-time buyers in the market was 28% in January, down from 31% a year earlier. About 32% of January existing-home sales were purchased in cash, up from 29% in the same month a year ago, NAR said.

Home builders are benefiting from the shortage of existing homes on the market. A measure of U.S. home-builder confidence rose in February for the third straight month, the National Association of Home Builders said last week.

Housing starts, a measure of U.S. home-building, fell 14.8% in January from the prior month, the Commerce Department said last week. Residential permits, which can be a bellwether for future home construction, declined 1.5%.

News Corp, owner of the Journal, also operates Realtor.com under license from NAR.

Write to Nicole Friedman at [email protected]

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