Home Blog Uncategorized Existing Home Prices Outpace Income Growth After 14 Months
Existing Home Prices Outpace Income Growth After 14 Months

Existing Home Prices Outpace Income Growth After 14 Months

In January, sales of previously owned homes in the United States saw a slight uptick, reaching a seasonally adjusted annual rate of 4 million, the highest since August. However, compared to January 2023, sales dropped by 1.7%, continuing a trend of lower sales volumes over the past two years.

Despite the year-over-year decline, the median home price rose by more than 5%, hitting a record high of $379,100. This increase marks the seventh consecutive month of annual gains in home prices. The rise in prices, coupled with historically low sales, highlights the ongoing challenges faced by first-time homebuyers entering the market.

The inventory of unsold existing homes increased slightly in January to 1.01 million units, representing a three-month supply at the current sales pace. While this is an improvement from previous months, it falls short of the six-month supply needed for a balanced market.

Regional variations in the housing market were evident, with the West seeing a 4% increase in sales, the South experiencing a 4% rise in median prices, and the Midwest recording a 2% increase in sales. Meanwhile, the Northeast saw no change in sales but a significant increase in median price.

The influx of activity in January could be attributed to easing mortgage rates, which hit a low of 6.60%, down from October’s peak of 7.79%. This decrease in rates has sparked hope for sidelined buyers, prompting them to take advantage of lower borrowing costs.

Despite the increase in sales activity, all-cash transactions accounted for 32% of sales, the highest in a decade. This surge in cash buyers, including investors and second-home buyers, may be driving up competition and making it more challenging for first-time buyers relying on mortgages.

Looking ahead, the housing market’s trajectory will depend largely on supply. With the current lack of inventory, home prices are expected to remain firm, posing a challenge for middle-income families reliant on mortgages. The outlook for home prices will hinge on the ability to increase supply, which remains uncertain at this time.

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