In January, sales of previously owned homes increased by 3.1%, reaching a total of 4 million units on a seasonally adjusted annualized basis. However, despite this monthly gain, sales were down by 1.7% compared to the previous year. The National Association of Realtors reported that the count is based on closings that likely took place in November and December, when mortgage rates started to decrease from their high of 8% in October, eventually reaching a low of around 6.6% in mid-December. As of now, mortgage rates have risen again, standing at over 7%, according to Mortgage News Daily.

The inventory of homes for sale in January increased to 1.01 million units, up by 3.1% from January 2023. Despite this increase, the supply remains low at a 3-month level, while a balanced market between buyers and sellers is typically considered to be at a six-month supply. This shortage in supply is one of the driving factors behind the continuous pressure on home prices within the market. The median existing home price for all housing types hit $379,100 in January, reflecting a 5.1% increase from the previous year and setting an all-time high for the month. Price increases were observed across all four U.S. regions, with 16% of homes being sold above the list price.

First-time buyers accounted for only 28% of total sales, significantly lower than the historical average of around 40%. The lack of lower-priced homes available for sale has been particularly challenging for this segment of buyers. Additionally, the high share of all-cash deals at 32%, up from 29% in previous months, indicates a market characterized by multiple offers and driven by record-high housing wealth. This level of all-cash transactions is the highest seen in nearly a decade, dating back to June 2014.

Although lower mortgage rates had initially boosted sales in January, the subsequent increase in rates has already started to impact the market negatively. Recent reports from Redfin showed a 10% year-over-year increase in new listings during the four weeks ending February 18, marking the largest surge in two months. The fluctuating mortgage rates and supply dynamics continue to shape the real estate market, influencing both buyer behavior and pricing trends.

The real estate market remains highly sensitive to changes in mortgage rates, supply levels, and buyer demographics. As the market evolves, stakeholders must adapt to these shifting dynamics to navigate through the challenges and opportunities presented in the current landscape.

Real Estate

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