It was the coldest January in 25 years, which may have contributed to a precipitous drop in homebuying activity in typically warm areas of the country, NAR says.
Contract signings for home purchases were put on ice during an unusually frigid January, with pending home sales—a forward-looking indicator of homebuying activity—falling 4.6% and reaching an all-time low last month, the National Association of REALTORS® reported Thursday. Pending home sales were down 5.2% annually in January.
Every major region of the country saw a decline in sales except the Northeast, which eked out a modest 0.3% gain, according to NAR data. The South saw the biggest sales drop, plummeting 9.2% in January. Sales fell 2% in the Midwest and 1.2% in the West.
Particularly harsh winter weather across the U.S. last month, in which some areas saw temperatures 50 and 60 degrees below normal, may have helped freeze the market, says NAR Chief Economist Lawrence Yun. “It is unclear if the coldest January in 25 years contributed to fewer buyers in the market,” he says. “If so, expect greater sales activity in upcoming months. However, it’s evident that elevated home prices and higher mortgage rates strained affordability.”
Mortgage rates ranged from 6.91% to 7.04% in January, defying economists’ predictions for more moderate borrowing costs. Buyers who were expecting a reprieve from record high home prices were disappointed when mortgage rates crossed the 7% threshold in mid-January. Last week, the 30-year fixed-rate mortgage averaged 6.85%, and Yun has said he expects rates to hover around 6.5% as the spring homebuying season kicks into gear.
Still, buyers are sensitive to even minor shifts in the financing landscape. It’s clear why: The average monthly mortgage payment on a $300,000 home is $50 higher—an extra $600 annually—than a year ago, NAR data shows. “Even a slight reduction in mortgage rates will likely ignite buyer interest, given rising incomes, increased jobs and more inventory choices,” Yun says.
Source: nar.realtor
