Home sales plunge, while housing affordability hits best level since March 2022, data finds

WASHINGTON - New data from the National Association of Realtors found that existing-home sales decreased significantly and affordability improved in January. 

The report, published in NAR’s Existing-Home Sales Report on Feb. 12, provided data on the level of home sales, prices and inventory.

Home sales decrease

By the numbers:

According to the data, existing-home sales decreased by 8.4% last month from December.

That’s the biggest monthly decline in nearly four years and the slowest annualized sales pace in more than two years. Month-over-month and year-over-year, sales fell in all regions.

Sales fell 4.4% compared with January last year. The latest sales figure fell short of the 4.105 million pace economists were expecting, according to FactSet.

What they're saying:

"The decrease in sales is disappointing," NAR Chief Economist Dr. Lawrence Yun said in a statement. "The below-normal temperatures and above-normal precipitation this January make it harder than usual to assess the underlying driver of the decrease and determine if this month’s numbers are an aberration."

Home sales slowed sharply across the Northeast, Midwest, South and West. But sales had their biggest annual and monthly drop in the West, which wasn't as affected by last month's winter storm as the other regions of the country.

Home affordability improving

Dig deeper:

Still, mortgage rates have been trending lower for months, which helped brighten the outlook for the upcoming spring home-buying season — at least for home shoppers who can afford to buy at current rates.

Many of the homes purchased last month likely went under contract in November and December, when mortgage rates eased to their lowest levels of the year.

The average rate on a 30-year mortgage briefly dropped last month to 6.06%, the lowest level since September 2022, according to mortgage buyer Freddie Mac. It has since inched higher, remaining this week at just above 6%, but close to a percentage point lower than a year ago.

Affordability improved for the seventh consecutive month, according to NAR’s Housing Affordability Index—increasing to 116.5 in January from 111.6 in December and 102 a year ago.

"Affordability conditions are improving, with NAR’s Housing Affordability Index showing that housing is the most affordable it’s been since March 2022," Yun continued. "This is due to wage gains outpacing home price growth and mortgage rates being lower than a year ago. However, supply has not kept pace and remains quite low."

Despite the sharp drop in sales, the data found that home prices continued to climb last month. The national median sales price increased 0.9% in January from a year earlier to $396,800. Home prices have risen on an annual basis for 31 months in a row.

He added: "Due to low supply, the median home price reached a new high for the month of January," Yun added. "Homeowners are in a financially comfortable position as a result. Since January 2020, a typical homeowner would have accumulated $130,500 in housing wealth."

Still, affordability remains a challenge for many Americans

Big picture view:

Even so, affordability remains a challenge for many aspiring homeowners, especially first-time buyers who don’t have equity from an existing home to put toward a new home purchase. They accounted for 31% of home sales last month. Historically, they made up 40% of home sales.

"Today we have minimal foreclosures, housing wealth continues to build out, it's just that renters who want to become homeowners are finding difficulty," Yun said.

The U.S. housing market has been in a sales slump dating back to 2022, when mortgage rates began to climb from pandemic-era lows. The combination of higher mortgage rates, years of skyrocketing home prices and a chronic shortage of homes nationally following more than a decade of below-average home construction have left many aspiring homeowners priced out of the market. 

Uncertainty over the job market is also likely keeping many would-be buyers on the sidelines. While the economy has been registering solid growth, the labor market has been sluggish for months. 

U.S. job openings fell in December to the lowest level in more than five years. 

Data published last spring revealed the states with the highest affordability and housing supply – and only one state received an A rating. 

The report, released by Realtor.com, ranked all 50 states based on how well they balanced housing affordability with new construction efforts.

RELATED: Housing affordability report card: Only one state gets an A

South Carolina earned the highest grade – an A – thanks to proactive construction efforts that outpaced demand. 

Other top performers include Texas, with robust building activity, and Iowa, one of the most affordable housing markets in the country. 

Real EstateU.S.