The U.S. housing market continued its long descent in January. According to the National Association of Realtors, sales of previously owned homes, which make up most of the housing market, fell 0.7% in January from the prior month to a seasonally adjusted annual rate of 4 million, the slowest since October 2010 and marking the longest streak of back-to-back monthly declines on record in figures going back to 1999. Existing home sales declined by 36.9% in year-over-year comparisons.
These numbers should come as no surprise as would-be homebuyers must contend with a never-ending list of obstacles, ranging from stubbornly high inflation to a combination of high property prices and soaring interest rates. In addition, the housing market remains competitive despite the lower number of sales.
Limited Inventory Keeps Prices High
Since the Federal Reserve Bank has initiated an aggressive interest rate hiking policy in the past year as its primary means to slow down inflation, mortgage rates have doubled. As a result, current homeowners may be hesitant to put their property on the market since they would need to renounce their current, relatively affordable home loans and see their buying power dwindle when buying a new property. This could be a contributing factor as to why the housing inventory remains significantly lower than it was in previous years. The number of homes on the market rose 2.1% to 988,000 units in January, bringing the monthly supply metric of available homes to 2.9 months, unchanged from the previous month. Although this is an improvement from the situation at the height of the pandemic, it is still a far cry from the five to six months of housing supply required to reach a balanced market, according to experts.
The limited inventory is keeping home prices high, although the days of double-digit growth are over. The national median existing-home price rose 1.3% in January from a year earlier to $359,000, NAR said, the smallest annual price gain since February 2012. Prices fell month-over-month for the seventh straight month after reaching a record high of $413,800 in June.
“It seems like half of the country is experiencing price declines… [but] I think the price decline will feel short in duration and modest,” said Lawrence Yun, chief economist at the National Association of Realtors. More than a generalized crash, parts of the country that were the most overvalued at the height of the housing market, such as California, Boise, or Austin, seem to be experiencing a market correction.
We’ll keep you updated on further developments. In the meantime, if you’d like more information about buying/selling or refinancing in today’s market, give us a call or drop us an email.
