High home prices, dwindling supply, and shaky consumer confidence are weighing down the U.S. housing market. Lawrence Yun, chief economist at the National Association of Realtors, describes the current situation as a “new housing crisis.” According to the latest data, sales of previously owned homes plummeted by 8.4% in January, marking the slowest pace since December 2023. This decline was steeper than expected and represented the biggest monthly drop since February 2022.
These figures reflect closings from contracts likely signed in the previous months when mortgage rates were steady at about 6.1%. It’s worth noting that this rate is actually lower than what it was a year ago, offering some hope to buyers navigating a tough market.
Regionally, the decline in sales was sharpest in the South and West. Yun highlights that while affordability is improving—thanks to wage growth outpacing home prices—low inventory continues to hinder potential buyers. The Housing Affordability Index shows that homes are more affordable now than they have been since March 2022.
However, many buyers are still struggling. Renters, in particular, are missing out on building housing wealth. Yun points out that “the movement is not happening,” leaving many Americans feeling stuck.
As of January, there were 1.22 million homes for sale, which is up 3.4% year-over-year but still down from December. At the current sales pace, this represents a slim 3.7-month supply. Historically, a balanced market needs about a six-month supply of homes.
Despite the tight supply, home prices have seen a slight increase. The median home price in January was $396,800, which is a record high for that month, up 0.9% from the previous year. Homeowners have benefited from this situation, accumulating an average of $130,500 in housing wealth since January 2020.
Interestingly, homes are taking longer to sell, averaging 46 days compared to 41 days a year ago. First-time buyers make up about 31% of sales—up from 28% last year—but the most significant sales increases have been in the luxury segment, particularly for homes priced over $1 million. Conversely, sales for homes costing less than $250,000 have dropped dramatically.
In a 2023 report by the Urban Institute, it was revealed that nearly half of all U.S. renters cannot afford to buy a median-priced home, underscoring the ongoing challenges in the market.
As this situation evolves, keeping an eye on economic indicators and buyer trends will be crucial. The struggle for many buyers in today’s market reflects bigger economic issues at play. As Lawrence Yun succinctly stated, “Americans are stuck.”
For more insights on housing trends, you can read the National Association of Realtors reports here.
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