US Existing-Home Sales Drop Amid High Mortgage Rates, Prices: NAR

A sign in front of a home for sale, in San Francisco on May 11, 2023. Justin Sullivan / Getty Images

U.S. existing-home sales fell sharply in January as elevated mortgage rates and high home prices weighed on demand to kick off 2025.

According to the National Association of Realtors, existing-home sales declined by 4.9 percent last month to a seasonally adjusted annual rate of 4.08 million units. This was down from December’s upwardly revised 2.9 percent gain.

Market estimates suggested a 1.7 percent drop in home resales to 4.16 million units.

Median existing-home sales prices rose by 4.8 percent from a year ago to $396,900. This represented the 19th straight month of year-over-year price gains.

The decline in sales activity was broad-based, with transactions of single-family homes and condominiums tumbling 5.2 percent and 2.4 percent, respectively. Single-family home prices surged 5 percent year over year to $402,000 while existing-condo prices jumped by 2.9 percent from January 2024, to $349,500.

Housing inventories improved last month, rising by nearly 17 percent from a year ago to 1.18 million units. Additionally, at the present rate of sales activity, unsold stocks are at a 3.5-month supply, up from 3 months in January 2024.

“More housing supply allows strongly qualified buyers to enter the market,” Lawrence Yun, chief economist at the National Association of Realtors, said in a statement. “But 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 noted that “housing affordability remains a challenge” due to the combination of higher mortgage rates and home prices.

State of the Mortgage Market

The U.S. mortgage market has been accelerating since September 2024. However, after topping 7 percent in mid-January, the average 30-year fixed-rate mortgage has eased slightly.

According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year fixed-rate mortgage reached 6.85 percent for the week ending Feb. 20, down by 2 basis points from the previous week.

“Mortgage rates decreased slightly this week,” Sam Khater, chief economist at Freddie Mac, said in a statement.

“The 30-year fixed-rate mortgage has stayed just under 7% for five consecutive weeks and in that time has fluctuated less than 20 basis points. This stability continues to bode well for potential buyers and sellers as we approach the spring homebuying season.”

Similar trends were observed in alternative surveys.

The Mortgage Bankers of Association’s average contract interest rate for 30-year mortgages was 6.93 percent in the week ending Feb. 14, the lowest since the end of December 2024. High interest rates put a lid on demand as mortgage applications tumbled 6.6 percent.

While markets shrugged off hotter-than-expected inflation data, prospective homebuyers have been reluctant to dive into the real estate market, said Joel Kan, deputy chief economist at the Mortgage Bankers Association.

“Despite mortgage rates declining, with the 30-year fixed mortgage rate dropping to 6.93 percent, mortgage applications decreased to their slowest pace since the beginning of the year,” Kan said. “Purchase applications were down for the week, as buyers remained on the fence, although loosening inventory may help support activity in the coming months.”

Mortgage rates track the yield on the benchmark 10-year Treasury, which has increased over the past several months amid sticky and stubborn inflation, tighter monetary policy, and fiscal policy concerns.

Residential homes under construction in Valley Center, Calif., on June 3, 2021. Mike Blake/Reuters

The annual inflation rate rose to 3 percent in January—the highest since June 2024—after the fourth consecutive monthly increase.

Upside inflation risks and examining the new administration’s policy agenda have forced the Federal Reserve to pause its easing cycle temporarily. The U.S. central bank left interest rates unchanged at the January Federal Open Market Committee (FOMC) meeting, keeping the benchmark federal funds rate at a range of 4.25 percent to 4.5 percent. Officials forecast two quarter-point rate cuts this year, while investors anticipate the next policy action in September.

A Snapshot of Industry Sentiment

Homebuilder confidence dipped in January to the lowest level in five months, weighed down by concerns about high housing costs, elevated mortgage rates, and the president’s tariff plans.

“While builders hold out hope for pro-development policies, particularly for regulatory reform, policy uncertainty and cost factors created a reset for 2025 expectations in the most recent HMI [Housing Market Index],” said Carl Harris, head of the National Association of Home Builders.

Industry sentiment soared following the November 2024 presidential election but has retreated on fears surrounding higher tariffs and tighter immigration levels, says Bill Adams, chief economist for Comerica Bank.

“Comerica forecasts moderate growth of homebuilding in 2025, since Americans are spending more time at home than pre-pandemic and supply has been slow to catch up with changed lifestyles,” Adams said in a note emailed to The Epoch Times. “However, higher tariffs, immigration restrictions, and high mortgage rates are downside risks to the outlook for the industry.”

Consumer interest in homebuying also decreased this month, falling by 21 percent from last year, according to the WalletHub Economic Index.

Still, data from real estate firm Redfin suggests potential homebuyers can navigate a more favorable housing environment.

Today, there is more total inventory to choose from, and new listings have surged by more than 4 percent to the highest level in three years. Additionally, buyers have more negotiating power since the typical home that sells takes 57 days, the longest span in five years.