Existing-home sales in January took a slight dip, falling 4.9% from December to a seasonally adjusted annual rate of 4.08 million, according to the National Association of Realtors (NAR).
This decline, though notable, was counterbalanced by a 2% year-over-year increase — marking the fourth consecutive month of growth when compared to January 2024.
The mixed signals in the market are indicative of broader trends: despite falling sales, home prices continue to climb. The median sales price of an existing home rose to $396,900, a 4.8% increase from January 2024. This marks the 19th straight month of price hikes, highlighting ongoing challenges in housing affordability.
"Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve," said Lawrence Yun, NAR's Chief Economist. "When combined with elevated home prices, housing affordability remains a major challenge."
Regional Breakdown: Varied Trends Across the U.S.
Regional data reveals divergent trends in home sales, with three out of four major U.S. regions showing declines. The Northeast saw a 5.7% drop in sales, but still posted a 4.2% year-over-year increase. Meanwhile, the Midwest saw a stable performance, holding steady at an annual rate of 1 million homes sold. Southern and Western regions, however, experienced more pronounced drops, with sales falling 6.2% and 7.4%, respectively, compared to December.
Despite the sales dip, inventory levels showed modest improvement. Unsold housing inventory increased 3.5% from December, bringing the total number of unsold homes to 1.18 million, representing a 3.5-month supply at the current sales pace. This is a slight increase from 3.2 months in December and 3.0 months in January 2024.
More inventory, Yun suggests, offers an opportunity for highly qualified buyers to enter the market. "More housing supply allows strongly qualified buyers to enter the market," he noted, emphasizing that lower mortgage rates combined with higher inventory could potentially stimulate greater demand.
Home Prices Stay High, First-Time Buyers Face Challenges
The ongoing price increases are not only a feature of the national landscape but are seen regionally as well. The median price for homes in the Northeast surged by 9.5% to $475,400, while the West saw the highest median price of $614,200, up 7.4% from January 2024.
However, these rising prices pose challenges for first-time homebuyers, who comprised just 28% of sales in January, a slight decrease from December’s 31%. This represents a continuation of a downward trend, with first-time buyers accounting for just 24% of all transactions in 2024, the lowest ever recorded by NAR. “For many consumers, both increased inventory and lower mortgage rates are necessary for them to purchase a different home or become first-time homeowners,” Yun added.
Mortgage Rates and Affordability
While mortgage rates have held steady for several months, hovering just below 7%, they continue to place pressure on affordability. As of February 20, 2025, the average 30-year fixed mortgage rate stood at 6.85%, slightly down from 6.90% a year earlier, according to Freddie Mac.
The combination of high mortgage rates and rising home prices has created a challenging environment for potential buyers, especially those looking to enter the market for the first time. Even so, the market has shown resilience, with some signs of recovery in the latter part of 2024. December saw a 2.2% increase in sales from the previous month, the highest growth rate since February 2024.
Despite these challenges, there are indications of optimism. The NAR's REALTORS® Confidence Index indicates that properties, on average, stayed on the market for 41 days in January, up from 35 days in December, signaling a slight cooling of the market. However, a larger share of homes remained on the market longer, suggesting potential shifts in buyer behavior as they grapple with affordability.
As Yun put it, “Consumers clearly understand the long-term benefits of homeownership,” but it remains to be seen whether more favorable conditions will emerge to unlock broader market participation.
