Existing-home sales fell last month as home prices continued to march upwards. Read more about the state of the market heading into spring in NAR’s latest housing report.
Rising home prices and elevated mortgage rates appear to be making prospective home buyers skittish. Existing-home sales—which account for completed transactions for single-family homes, townhomes, condos and co-ops—fell nearly 5% in January compared to the previous month, the National Association of REALTORS® reported Friday. However, existing-home sales are up 2% from a year ago, offering a hopeful sign that 2025 will mark a turnaround for the housing market after the lowest home sales in 30 years last year.
“Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve,” says NAR Chief Economist Lawrence Yun. “When combined with elevated home prices, housing affordability remains a major challenge.”
A new report this week showed that a family earning the national median income of $97,800 is spending 37% of their income on mortgage payments for a median-priced existing home. The same family is spending 38% of their income to buy a median-priced new home, according to the National Association of Home Builders/Wells Fargo Cost of Housing Index. Financial experts often recommend spending no more than 30% of a household income on housing costs.
Home Prices Remain Resilient
Home prices are still rising: The median existing-home sales price in January rose nearly 5% compared to a year ago, reaching $396,900, NAR reports. All four major regions of the U.S. posted home price increases last month, led by a 9.5% annual gain in the Northeast.
Higher home prices may be creating a market of the haves and have-nots. The spread in median net worth between homeowners and renters stands at $415,000 for homeowners versus $10,000 for renters, NAR’s research has previously shown.
Prospective first-time home buyers continue to face challenges entering the housing market. First-timers comprised 28% of sales in January, down from 31% in December 2024. In November 2024, NAR reported that the annual share of first-time buyers was 24%, the lowest on record. First-time home buyers are unable to leverage the sale of a previous home in a home purchase, which has left many prospective buyers sidelined as they continue to save up and delay their entrance into homeownership.
Other buyers are looking to bypass elevated mortgage rates altogether: All-cash buyers accounted for nearly 30% of transactions in January, remaining at an elevated level, NAR reports. Individual investors and second-home buyers tend to make up a big bulk of all-cash sales, purchasing 17% of homes in January. Repeat home buyers also have been leveraging their equity from the sale of a previous home to bring more cash to the closing table.
Housing Inventory Is Rising: But Is It Enough?
The inventory of unsold existing homes increased 3.5% in January compared to the prior month—and a notable 16.8% from a year ago, NAR reports. Yun has said the market still needs another 30% growth in inventory to have a similar number of listings as before the COVID-19 pandemic.
“More housing supply allows strongly qualified buyers to enter the market,” Yun says. “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.”
Homes continue to be snatched up relatively quickly: 47% of NAR members report their listings selling in less than a month in January, according to the newly released REALTORS® Confidence Index report. Fifteen percent of homes sold above list price, and listings, on average, received 2.6 offers from buyers.
Regional Breakdown on Home Sales
Sales decreased in three of the four major regions of the U.S. last month, while holding steady in the Midwest, NAR reports. Here’s a closer look at how existing-home sales fared in January across the country:
- Northeast: Existing-home sales fell 5.7% from December 2024, settling in at an annual rate of 500,000. Sales are up 4.2% from a year ago. Median price: $475,400, an uptick of 9.5% from one year earlier.
- Midwest: Existing-home sales were unchanged, staying at an annual rate of 1 million. Sales are up 5.3% compared to a year ago. Median price: $290,400, up 7.2% from a year earlier.
- South: Existing-home sales fell 6.2% from December 2024 to an annual rate of 1.83 million. Home sales are essentially identical compared to a year earlier. Median price: $356,300, up 3.5% from last year.
- West: Existing-home sales fell 7.4% month over month to an annual rate of 750,000. Sales are up 1.4% from a year ago. Median price: $614,200, up 7.4% from January 2024.
Source: nar.realtor
