US Existing Home Sales Fall More Than Expected in January

The U.S. housing market continued its downward trend in January, with existing home sales falling more than expected. According to the National Association of Realtors (NAR), existing home sales decreased by 4.9% from December to a seasonally adjusted annual rate of 4.08 million units. This decline was more significant than the 2.5% decrease that analysts had predicted.



The median existing-home sales price rose by 4% to $407,200, halting three straight months of declines. Meanwhile, the inventory of unsold housing rose by 0.7% to 1.37 million, 4.2 months of supply at the current pace of sales.

The decline in existing home sales can be attributed to several factors, including rising mortgage rates, increasing home prices, and limited inventory. Mortgage rates have been hovering around 7% this year, more than double the record low of 2.65% hit in 2021. This increase in borrowing costs has made homeownership less affordable for many prospective buyers, particularly first-time buyers who don't have equity from an existing home to put toward a new purchase.

Home prices have been rising on an annual basis for the 19th consecutive month, with the national median sales price increasing by 4.8% in January 2025 compared to the same period last year. This increase in home prices, combined with higher mortgage rates, has made homeownership less accessible for many buyers.

Limited inventory has also contributed to the decline in existing home sales. While the number of homes actively for sale has been growing for 15 straight months, the total number of unsold homes, including homes that are under contract, increased by 17.1% compared to last year. This limited inventory has led to increased competition among buyers, driving up prices and making it more difficult for first-time buyers to enter the market.

Despite these challenges, there are signs that the market may be stabilizing. In November 2024, existing-home sales rose to a seasonally adjusted rate of 4.15 million, the swiftest pace since March (4.22 million). Sales accelerated 6.1% from one year ago, the largest year-over-year gain since June 2021 (+23%) (NAR, 2024). This increase in sales can be attributed to a growing economy, increasing housing inventory, and consumers becoming accustomed to a new normal of mortgage rates between 6% and 7% (NAR, 2024).

In the long term, the demand for existing homes is expected to grow moderately as buyers become accustomed to higher prices and mortgage rates. However, if mortgage rates manage to fall faster, then pent-up demand from the last few years could be unleashed with volumes returning more to historic norms (U.S. News, 2025). This would depend on factors such as changes in immigration policies, expanding tariffs, the rising costs of damages related to climate change, the expansion of AI into more parts of daily lives, and the steady dissolution of the rules-based international order focused on global trade flows (U.S. News, 2025).

In conclusion, the decline in existing home sales in January 2025 can be attributed to rising mortgage rates, increasing home prices, and limited inventory. While the market faces significant challenges, there are signs of stabilization, and the long-term outlook for the housing market remains positive, depending on various factors.