U.S. existing home sales experienced their steepest monthly decline in nearly four years during January, with extreme cold weather and widespread winter storms significantly impacting transactions. According to data released on Thursday by the National Association of Realtors (NAR), sales of previously owned homes fell 8.4% month-over-month to a seasonally adjusted annual rate of 3.91 million units, notably below the median estimate from economists surveyed by media.
The report indicated that a widespread winter storm sweeping across the United States in late January brought rain, snow, and icy conditions, likely delaying the completion of many signed contracts. In the South, the nation's largest housing market and the most severely affected region, sales plummeted 9% to an annualized rate of 1.81 million units. Sales also weakened broadly in other regions.
NAR Chief Economist Lawrence Yun stated in a release that below-average temperatures and above-average precipitation in January made it more difficult to identify the "true drivers" of the sales decline and to determine whether the monthly data represented an anomaly.
A bright spot for the housing market was an improvement in affordability. Recent declines in mortgage rates and a slowdown in home price growth pushed the NAR's housing affordability index to its highest level since 2022 last month, though it remains significantly below pre-pandemic levels. NAR data showed the median price for existing homes sold in January rose 0.9% year-over-year to $396,800. Without a more sustained period of affordability improvement, a housing market recovery could be prolonged.
Regarding buyer composition, the share of first-time homebuyers increased to 31% in January, up from 29% the previous month and higher than the same period last year. On the supply side, conditions improved slightly, with the inventory of existing homes for sale rising 3.4% year-over-year to 1.22 million units. A gradual supply increase through 2025 is expected to help moderate price gains, but Yun emphasized during a call with reporters that a "much larger increase" in listings is still needed to significantly boost transactions.
Market participants generally anticipate a rebound in existing home sales this year. A media survey from December indicated analysts expect sales growth in 2024 to range between 1.7% and 14%, contingent on continued moderation in price increases and stabilized financing costs. Data showed the average mortgage rate fell to 6.16% last month, its lowest level in over a year.
On the policy front, the U.S. President has recently introduced several measures aimed at stimulating the housing market to address political pressures stemming from affordability challenges. These include efforts to limit institutional investors' purchases of single-family homes and directives for Freddie Mac and Fannie Mae to purchase $200 billion in mortgage bonds to ease financing conditions.