Existing home sales started 2023 right where they left off at the end of 2022, dropping for the 12th consecutive month. In January, the seasonally adjusted sales pace for existing homes dropped 0.7% from December to a pace of 4.00 million, according to a report from the National Association of Realtors (NAR) released Tuesday.
On a yearly basis, existing home sales were down 36.9% in January.
“This is the lowest level of home sales activity since May 2020 when the COVID-19 pandemic had shut down much of the economy,” Lisa Sturtevant, the Bright MLS chief economist said in a statement. “Before that, you have to go back to October 2010 to find total sales this low.”
Despite this industry analysts remain optimistic.
“While home sales have now fallen for 12 months in a row, the January decline is much smaller than previous drops,” Sturtevant said. “January sales reflect purchase contracts made in November or December, and there is evidence that in many markets, the housing market has bottomed out and buyers are beginning to return to the market.”
The median sales price of an existing home continued to climb in January, rising 1.3% year over year to $359,000. This marks 131 consecutive months of yearly increase — the longest running streak on record.
“Home sales are bottoming out,” Lawrence Yun, NAR’s chief economist, said in a statement. “Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and more expensive regions experiencing declines.”
As the number of days a property typically stayed on the market rose to 33 in January from 26 days in December, inventory of existing homes also rose, jumping 2.1% month over month and 15.3% year over year to 980,000. This represents 2.9 months of supply at the current sales pace.
“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.”
Although affordability remains challenging for many, distressed sales, foreclosures and short sales represented just 1% of sales in January, the same as in December and a year ago.
Regionally, existing home sales fell month over month in two out of the four regions, with the Northeast (annual rate of 500,000 homes) and the Midwest (annual rate of 960,000 homes) retracting 3.8% and 5.0%, respectively. The South and the West on the other hand rose 1.1% and 2.9% to rates of 1.82 million and 720,000, respectively. However, the annual sales pace in the West is still down the most out of the four regions year over year, dropping 42.4% from January 2022.
“The biggest surprise was in the West, where home sales activity ticked up 2.9% compared to December. Even though mortgage rates are still double what they were a year ago, they are down from their November peaks. Buyers have started adjusting their expectations and are ready to get back into the market,” Sturtevant said. “Home sales will remain below the historic average of 5 million throughout 2023. Inventory remains a major constraint on home buying activity. 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.”