January home sales decline as elevated mortgage rates and prices deter potential buyers.

LOS ANGELES — In January, the sales of existing homes in the United States experienced a decline as escalating mortgage rates and rising home prices discouraged many potential buyers, even with an increased availability of properties on the market.

According to the National Association of Realtors, sales decreased by 4.9% from December, translating to a seasonally adjusted annual rate of 4.08 million units. While there was a 2% increase compared to January of the previous year—marking the fourth consecutive year of annual growth—this figure fell short of economists’ expectations, which anticipated a rate of 4.11 million units.

In terms of pricing, the national median sales price saw a rise for the 19th month in a row, increased by 4.8% year-over-year in January, reaching $396,900.

The inventory of homes not yet sold stood at 1.18 million at the end of January, which marks a 3.5% increase from December and a significantly higher 16.8% compared to January of the prior year, according to NAR.

This inventory corresponds to a 3.5-month supply based on the sales pace, an increase from a 3.2-month supply in December and from a tight 3-month supply at the end of January last year. Typically, a balanced market is thought to have a supply of 5 to 6 months.

The housing market in the U.S. has faced declining sales since 2022 when mortgage rates began their ascent from the lows seen during the pandemic. Last year, sales of previously occupied homes fell to the lowest levels recorded in nearly three decades.

Although the average rate for a 30-year mortgage dipped to a two-year low last September, it has primarily remained around 7% this year. This figure is more than double the all-time low of 2.65% recorded just over four years ago.

The combination of surging home prices and high mortgage rates has made it challenging for many potential homebuyers to engage in the market, particularly first-time buyers who typically lack equity from a previous residence to assist in acquiring a new home. In January, these first-time buyers comprised 28% of total sales, consistent with the share from January 2024, but down from 31% in December. Notably, the annual share of first-time buyers reached a record low of 24% last year, significantly lower than the historical average of 40%.