Pending home sales plummeted to their lowest point on record in January, falling 4.6% from December, according to data from the National Association of Realtors (NAR). The decline marks the worst performance since the metric’s inception in 2001 and represents a 5.2% drop compared to January 2024.
Higher Mortgage Rates and Home Prices Squeeze Buyers
A combination of elevated mortgage rates and persistently high home prices has placed significant strain on affordability. The average rate for a 30-year fixed mortgage climbed above 7% for the entirety of January, discouraging many buyers from entering the market.
“It remains uncertain to what extent unusually cold weather impacted market activity, but affordability challenges due to rising costs clearly played a role,” stated NAR’s chief economist.
Regional Disparities in Home Sales
While sales rose month-over-month in the Northeast, they fell across other regions, with the steepest decline in the South, historically the strongest housing market in recent years. Even in the West, where weather disruptions were minimal, sales continued to slide.
Home Prices Show Signs of Easing
Despite price cuts in select markets, national home prices remain higher year-over-year. According to Realtor.com, housing inventory increased by 17% compared to last January, marking the 14th consecutive month of annual inventory growth. However, economists warn that supply growth remains uneven across the country, limiting its impact on overall sales volume.
“While there are more homes on the market, inventory levels remain tight in high-demand areas, restricting buyers’ options,” noted a Realtor.com economist.
Market Outlook: Will Sales Rebound?
Looking ahead, analysts suggest that housing activity may improve if borrowing costs stabilize. However, with rates still elevated and affordability stretched, the near-term outlook remains uncertain. Buyers and sellers alike will be closely watching mortgage rate trends and economic data for signs of a market shift.
