The US housing market saw a surprise drop in existing home sales in January, with sales falling 4.9% from December’s levels. Despite an increase in available inventory, elevated mortgage rates and high prices continue to deter buyers.
According to the National Association of Realtors (NAR), the median price for an existing home rose 5% from a year ago to $396,900, while mortgage rates hover near historically elevated levels of just under 7%. Economists say that this combination makes it difficult for both buyers and sellers to participate in the market.
The inventory of homes for sale has increased by 3.5%, but more properties are needed to keep up with demand. Chief Economist Lawrence Yun noted that while an increase in supply can help qualified buyers enter the market, lower mortgage rates are also necessary for consumers to purchase a different home or become first-time homeowners.
Economists warn that the housing market is unlikely to recover unless prices soften significantly. Oxford Economics lead US economist Nancy Vanden Houten stated, “Increases in supply may keep a floor under sales, but unless prices soften, many buyers will continue to be priced out of the market.”
Similar indicators point to a slow housing market, including declining pending home sales and low mortgage application volume. The drop in home sales is the first time in four months that momentum has slowed, leading some economists to question whether the housing market is slowing down.
Source: https://www.investopedia.com/more-homes-are-for-sale-but-people-aren-t-buying-11684176