The year 2023 witnessed a significant slowdown in the housing market, with sales experiencing their worst slump in nearly three decades. However, a recent report from the National Association of Realtors (NAR) paints a picture of cautious optimism, highlighting a modest rebound in home sales in January 2024.
This uptick, amounting to a 3.1% increase from December 2023, marks the highest sales volume since August 2023. This positive shift can be attributed, in part, to a welcome decline in mortgage rates, which have dropped by around a percentage point since last fall. This decline has enticed some buyers to re-enter the market, despite continued high home prices.
While the January figures offer a glimmer of hope, it's important to acknowledge the complexities at play. While lower rates have enticed new buyers, Mr. Lawrence Yun, NAR's Chief Economist, cautions that recent upward ticks in these rates might dampen demand once again.
Compared to the previous year, January sales remain 1.7% lower. The housing market faced significant headwinds in 2023, as soaring mortgage rates and record-breaking home prices pushed many potential buyers and sellers to the sidelines.
The recent decrease in mortgage rates has made homeownership slightly more attainable for some individuals. The average rate for a 30-year fixed mortgage currently hovers between 6.6% and 6.8%, a significant drop from the October 2023 peak of 7.79%.
Despite the upswing, the housing market continues to favor sellers due to a persistent shortage of available properties. Homeowners, still benefiting from their current low mortgage rates, are hesitant to sell, further tightening supply and driving prices upwards.
Reflecting this imbalance, the national median existing-home price in January reached $379,100, a 5.1% increase year-over-year.
While the January data primarily reflects purchase decisions made during the November-December period of falling rates, a positive trend is emerging. New listings, a crucial indicator of future inventory, saw a rise in January compared to the previous year. This suggests that some sellers who delayed their sales in 2023 due to high rates are now entering the market.
Mr. Orphe Divounguy, a senior economist at Zillow Group, interprets this new listing trend as a sign of gradual improvement. While inventory levels remain below normal, he emphasizes that the gap is slowly closing.
As of January's end, there were 1.01 million homes for sale or under contract nationwide, marking a modest increase from December and January 2023. This translates to a 3-month supply of homes at the current sales pace.
