By: Nicole Friedman

U.S. Home Sales Fall for 12th Straight Month

Sales of previously owned homes drop 0.7% in January to slowest level since October 2010

The U.S. housing market weakened in January for the 12th straight month as continued high mortgage rates kept buyers on the sidelines.

Sales of previously owned homes, which make up most of the housing market, fell 0.7% in January from the prior month to a seasonally adjusted annual rate of 4 million, the slowest since October 2010, the National Association of Realtors said Tuesday. January sales fell 36.9% from a year earlier.

January’s decline marked the longest streak of back-to-back monthly declines on record in figures going back to 1999, NAR said.

Existing-home sales dropped last year to the lowest level since 2014 after a surge in mortgage rates and record-high home prices raised the cost of many home purchases by hundreds of dollars a month. The drop in affordability, along with general economic uncertainty, pushed buyers out of the market.

Surprisingly strong inflation, jobs and retail spending figures in recent weeks have fueled expectations that the Federal Reserve could raise interest rates more than investors anticipated. The Fed has aggressively raised its benchmark federal-funds rate to cool the economy and bring down high inflation, hitting the rate-sensitive housing market particularly hard.

The average rate on a 30-year fixed mortgage rose to 6.32% last week, the biggest one-week increase in four months.

So far this year, buyers have been sensitive to changes in mortgage rates, real-estate agents say. Some of the sidelined buyers started to shop again in January and February as mortgage rates ticked down from last year’s recent highs and sellers were more willing to negotiate on price and give other concessions.

“I think the worst is behind us, [but] it really all depends on mortgage rates,” said Selma Hepp, chief economist at CoreLogic. “As soon as mortgage rates started coming down, I think people felt more comfortable.”

The national median existing-home price rose 1.3% in January from a year earlier to $359,000, NAR said, the smallest annual price gain since February 2012. Prices fell month-over-month for the seventh straight month after reaching a record high of $413,800 in June.

Economists surveyed by The Wall Street Journal had estimated that sales of previously owned homes rose 1.2% in January from the prior month.

Homes typically go under contract a month or two before the contract closes, so the January sales data largely reflect purchase decisions made in December and November.

Home-shopping activity increased in January and early February, real-estate agents said. Real-estate brokerage Redfin Corp.’s seasonally adjusted measure of home-buying demand, which tracks buyer inquiries, rose in the week ended Feb. 5 to the highest level since September before declining 1% the following week.

“A lot of people that gave up on the housing market in maybe spring and summer of last year are now like, ‘OK, I feel like I can breathe and get in again,’” said Wendy Dickinson of Coldwell Banker Realty in Charlotte, N.C. “People are understanding that the rates are not going to dip back down to 2.5%.”

Rob and Crystal Lucha started house hunting in the Austin, Texas, area in January after moving there last year for work.

“After sitting on the sidelines for a while, intuitively it felt like this could be a good time to buy,” Mr. Lucha said. “Homes were sitting on the market for longer.”

The couple had an offer accepted this month on a three-bedroom home in Leander, Texas, for $375,000, about 3.8% below the listing price, he said.

The higher interest rates have changed what many buyers can afford, even with prices falling from their springtime peaks.

Late last year, “so many households had clearly hit an affordability ceiling, where even if they wanted to move forward with a home purchase it was just not possible with rates at 7%,” said Danielle Hale, chief economist at Realtor.com. “It’s more of an open question, with rates closer to 6%.”

News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from NAR.

The inventory of homes for sale remains well below normal for this time of year, which could keep home prices in some regions from sliding further, economists and real-estate agents said.

Many homeowners have rates on their mortgages below 4%, and they are unwilling to give up their current rate for a higher rate on a new home. With prospective sellers sitting on the sidelines, economists expect the inventory of homes for sale to remain lower than normal this year.

Nationally, there were 980,000 homes for sale or under contract at the end of January, up 2.1% from December and up 15.3% from January 2022, NAR said. At the current sales pace, there was a 2.9-month supply of homes on the market at the end of January.

The typical home sold in January was on the market for 33 days, up from 26 days from the prior month, NAR said.

The share of first-time buyers in the market was 31% in January, up from 27% a year earlier. About 29% of January existing-home sales were purchased in cash, up from 27% in the same month a year ago, NAR said.

Existing-home sales fell the most month-over-month in the Midwest, down 5%, and in the Northeast, down 3.8%. Sales rose from the prior month in the South and the West.

Some large, publicly traded home builders reported higher demand in January in recent earnings calls.

A measure of U.S. home-builder confidence rose in February to the highest level since September, the National Association of Home Builders said last week.

Housing starts, a measure of U.S. home-building, fell 4.5% in January from December, the Commerce Department said last week. Residential permits, which can be a bellwether for future home construction, rose 0.1%.

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