In West Seattle, Washington, signs marked “For Sale” and “Sale Pending” are visible, highlighting the current real estate situation as of June 18, 2024. The National Association of Realtors (NAR) is set to announce the latest statistics on existing home sales on June 21.
The housing market experienced significant challenges in January, mainly due to high mortgage rates and expensive home prices that discouraged many potential buyers. The number of pending sales, which reflects contracts signed for existing homes, dropped by 4.6% from December. This was the lowest level recorded since NAR began monitoring this data in 2001. Compared to January 2024, sales fell by 5.2%, indicating a slowdown in future home closings.
Lawrence Yun, the chief economist for NAR, commented on the situation, saying it’s uncertain whether the unusually cold January, the coldest in 25 years, affected buyer behavior. However, he acknowledged that the combination of high home prices and mortgage rates has put a strain on affordability, making it difficult for many to purchase a home.
While harsh weather might have played a role in the declining sales, trends varied by region. Sales actually improved month-over-month in the Northeast, while the West saw a decrease, despite experiencing milder temperatures. The South, which had been a very active market for home sales, saw the steepest decline in sales activity.
In January, mortgage rates were also on the rise. The average interest rate for a 30-year fixed mortgage had been below 7% in early December but climbed above that mark throughout January, according to Mortgage News Daily. This increase in borrowing costs further complicates the situation for potential homebuyers.
Although home prices have been gradually decreasing in certain areas and more sellers are lowering their prices, the overall national trend still shows prices higher than they were the previous year. This dip in sales occurred even though the inventory of homes available for sale in January, which includes homes under contract but not yet closed, grew by 17% compared to last year. This marks the 14th consecutive month of annual inventory growth, according to information from Realtor.com.
Hannah Jones, an economist at Realtor.com, pointed out that while an increase in available homes could lead to more signed contracts, the boost in inventory is not uniform across the country. Many regions experiencing strong buyer interest still have low inventory levels, which hinders the potential for increased home sales.
In summary, the combination of high mortgage rates, elevated home prices, and adverse weather has created a challenging landscape for home sales. Even with an increase in the number of homes for sale, inherent disparities in inventory across different areas could pose further obstacles for the housing market in the months ahead.