Sales of previously owned homes in the United States declined sharply in January, surprising many analysts who expected a modest rebound following months of easing mortgage rates. According to the National Association of Realtors (NAR), total existing-home sales fell 8.4% from December, landing at an annualized pace of 3.91 million units. The last time the market saw a drop this steep was nearly four years ago, and this latest decline reinforces how deeply affordability pressures continue to shape buyer behavior.
Compared with January of the previous year, sales were lower by about 4.4%, missing the 4.1 million target that economists had forecast, according to data from FactSet. Every major region of the country recorded slower activity, suggesting that no area was immune to the broader cooling trend. Some economists see a mix of high prices, economic uncertainty, and harsh winter conditions as likely contributors to the slowdown.
Lawrence Yun, chief economist at NAR, said the combination of colder-than-usual temperatures and heavy precipitation might have influenced the sharp fall in transactions. When seasonal and weather variables interfere with demand, he explained, it can become difficult to determine whether weaker data signals a temporary dip or a more sustained pattern of consumer hesitation.
Even as monthly sales fell, home values continued their steady climb. The national median sale price rose 0.9% year-over-year to $396,800. That marks the 31st straight month in which prices have increased from the prior year, demonstrating how tight inventory has kept competition alive among potential buyers. The long-term shortage of available housing remains a persistent obstacle, particularly in metropolitan areas where job growth and population inflows remain strong.
The overall slump in housing activity dates back to 2022, when mortgage costs began to rise sharply from the ultra-low levels reached during the pandemic. At that time, borrowing rates quickly doubled, sending millions of would-be buyers to the sidelines. Despite some improvement since late last year, monthly sales have hovered near a 4 million annual pace since 2023, well below the typical U.S. historical average of about 5.2 million units.
The good news for borrowers is that interest rates have been gradually declining for several months. According to data from Freddie Mac, the average rate for a 30-year mortgage temporarily fell to 6.06% in January, the lowest level since September 2022. Although it has since ticked slightly higher, the rate remains roughly a full percentage point below where it stood a year earlier. The question now is whether this easing in financing costs can translate into meaningfully higher sales this spring.
The answer may depend largely on affordability. Even with improved lending conditions, rising home prices mean monthly payments remain out of reach for many households, especially first-time buyers without equity from an existing home. Inflation pressures, job market uncertainty, and the lingering memory of recent economic volatility have made consumers more cautious about long-term commitments such as home purchases.
Another reflection of the market’s cooling is seen in how long homes are taking to sell. NAR reported that there were about 1.22 million unsold homes at the end of January, down 0.8% from December but up 3.4% from a year earlier. Inventory remains below pre-pandemic norms, which used to hover closer to 2 million, yet it is slowly recovering. Based on current sales trends, the supply now equals about 3.7 months’ worth of listings. A balanced market typically falls between five and six months of supply.
These dynamics reveal a housing market still struggling to regain its momentum. The combination of high property values, limited supply, and lingering affordability challenges continues to hold back a full recovery, even as buyers gain some relief from lower interest rates. Unless wage growth and new construction accelerate meaningfully in the coming months, the spring season might bring only gradual improvement rather than a decisive rebound.
