Buyers might finally be calling the shots in 2023, as housing inventory while still low, has started to climb up.
Existing-home sales fell for the twelfth straight month in January, with year-over-year sales falling 37%, the biggest decline since 2010, according to a report released Tuesday by National Association of Realtors.
“The current sales activity is even lower than the lockdown month in April 2020,” said NAR Chief Economist Lawrence Yun. “Home sales are bottoming out.”
Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and more expensive regions experiencing declines, he said.
Total housing inventory at the end of January was 980,000 units, up 2.1% from December and 15.3% from one year ago (850,000). Unsold inventory sits at a 2.9-month supply, unchanged from December but up from 1.6 months in January 2022.
“Inventory remains low, but buyers are beginning to have better negotiating power,” Yun added. “Homes sitting on the market for more than 60 days can be purchased for around 10% less than the original list price.”
The recent rise in inventory has been driven by a pullback in new purchase contracts, and not a surge in new listings, according to Bright MLS Chief Economist Lisa Sturtevant.
“Current homeowners are still not finding a reason to list their home for sale, particularly when the rate on their mortgage is below 3%,” she says, adding that while there is much more inventory on the market than a year ago, the supply of homes is still half of what it was before the pandemic.
Are home prices falling?
The median existing-home price for all housing types in January was $359,000, an increase of 1.3% from January 2022 ($354,300). Home prices climbed in three out of four U.S. regions while falling in the West. This marks 131 consecutive months of year-over-year increases, the longest-running streak on record.
What’s happening with mortgage rates?
Mortgage rates moved up for the second consecutive week. The economy is showing signs of resilience, mainly due to consumer spending, and rates are increasing, according to Freddie Mac. Overall housing costs are also increasing and therefore impacting inflation, which continues to persist.
The average rate for a 30-year fixed-rate mortgage increased to 6.32% for the week ending Feb. 16, according to Freddie Mac's Primary Mortgage Market Survey. This time last year, the rate stood at 3.92%.
“The state of decline in sales activity is driven by the large increase in mortgage rates,” says Yun.
More cash buyers in the market
Properties typically remained on the market for 33 days in January, up from 26 days in December and 19 days in January 2022. Fifty-four percent of homes sold in January were on the market for less than a month.
All-cash sales accounted for 29% of transactions in January, up from 28% in December and 27% in January 2022.
Individual investors or second-home buyers, who make up many cash sales, purchased 16% of homes in January, unchanged from December but down from 22% in January 2022.
Condo prices grow faster than single-family home prices
The median existing single-family home price was $363,100 in January, up 0.7% from January 2022, whereas the median existing condo price increased by about 5% to $320,000 in the same time period.
Single-family home sales declined to a seasonally adjusted annual rate of 3.59 million in January, down 0.8% from 3.62 million in December and 36% from one year ago.
Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 410,000 units in January, unchanged from December but down 43% from the previous year.
Swapna Venugopal Ramaswamy is a housing and economy correspondent for USA TODAY. You can follow her on Twitter @SwapnaVenugopal and sign up for our Daily Money newsletter here.
This article originally appeared on USA TODAY: 'Home sales are bottoming out': Housing market hits lockdown low.