Existing-home sales stumbled in January, falling 4.9 percent from December to an annualized pace of 4.08 million, a sharper drop than the 2.6 percent decline economists had expected. The start of 2025 continues a prolonged period of weakness in home sales, with affordability challenges keeping many buyers on the sidelines.
Despite the monthly decline, sales remained 2.0 percent higher year-over-year, marking the fourth consecutive month of annual increases. Yet, that improvement has done little to ease affordability concerns. The median price of an existing home climbed 4.8 percent to $396,900, the highest ever recorded for a January.
Affordability Crisis Persists
Housing affordability remains a major obstacle. The 30-year fixed mortgage rate averaged 6.85 percent as of mid-February, little changed from a year ago and still well above pre-pandemic levels. The combination of high borrowing costs and rising prices continues to price out many first-time buyers, who made up only 28 percent of purchases in January, the lowest level since tracking began.
One of the starkest divides in the housing market is between high-end and entry-level sales. Homes priced above $1 million saw a 27 percent increase in sales over the past year, while purchases of homes under $250,000 declined. Cash buyers, who remain less sensitive to mortgage rates, made up 29 percent of transactions, while investors and second-home buyers accounted for 17 percent.
A Buyer’s Market? Not Quite.
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Inventory is increasing, but that has not yet translated into stronger demand. The number of homes for sale rose 16.8 percent from a year ago, reaching 1.18 million units—a 3.5-month supply at the current sales pace. Homes also spent more time on the market, averaging 41 days, the longest since early 2020. […]
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