Drop in Existing Home Sales Bigger Than Expected: What It Means for Buyers and Sellers
📍 Source: National Association of Realtors via CNBC
January’s real estate market delivered a surprising decline in existing home sales, dropping 4.9% from December, nearly twice the 2.6% decline that analysts were anticipating. This brings the seasonally adjusted annualized pace of existing home sales to 4.08 million units, marking one of the lowest levels in the past 15 years.
While sales numbers showed a modest 2% year-over-year increase, they remain historically low, suggesting that affordability challenges and economic uncertainty continue to weigh on the housing market.
Let’s break down the key takeaways from this latest NAR market update:
📉 Key Market Metrics From January
🔹 Total homes for sale: 1.18 million, a 3.5% increase month-over-month (MOM) and a 17% increase year-over-year (YOY).
🔹 Months of supply: 3.5 months, reflecting an increasing inventory trend.
🔹 Time on market: The average home spent 41 days on the market, marking the longest days-on-market (DOM) since January 2020, before the pandemic-driven housing boom.
🔹 Median home sale price: $396,900, up 4.8% YOY—the highest price ever recorded for January.
🔹 All-cash transactions: 29% of sales were cash, which is still high but down from 32% last year.
🔹 First-time homebuyers: Represented just 28% of buyers, unchanged from last year, but well below the historical average of 40%.
This report reinforces the ongoing shift toward a buyer’s market. More inventory is available, homes are staying on the market longer, and price growth is cooling—but affordability remains a challenge, keeping many buyers sidelined.
🏠 What’s Happening at Different Price Points?
One of the most unexpected trends in this report was the clear divergence between different price segments.
📉 Lower-Priced Homes ($100,000 – $250,000): Sales Dropped 1.2% YOY
Homes in this price bracket saw declining demand, likely due to continued affordability challenges, higher interest rates, and a lack of sufficient supply at entry-level price points.
📈 Luxury Market ($1M+): Sales Surged Nearly 27% YOY
On the flip side, luxury homes saw a major uptick in sales, with high-end properties ($1 million and above) increasing nearly 27% YOY. Wealthier buyers—many of whom are less sensitive to mortgage rates and more likely to make all-cash offers—are fueling the high-end market while lower and middle-tier price segments remain sluggish.
💰 Why Is the Luxury Market Outperforming?
Several factors are at play here:
✅ Affluent Buyers Are Less Affected by Interest Rates – Many luxury home buyers pay in cash or take out smaller loans, meaning they aren’t as impacted by fluctuating mortgage rates.
✅ Inventory Growth in High-End Markets – As more luxury properties hit the market, buyers in this segment are finding more options and better negotiating leverage.
✅ Wealth Transfer & Investment Appeal – Many wealthy buyers are diversifying assets by investing in real estate, particularly in prime coastal and high-demand areas like Los Angeles, Miami, and New York.
✅ Buyers in High-Tax States Are Moving to Lower-Tax Areas – Many high-net-worth individuals are relocating to states with more favorable tax laws, such as Florida, Texas, and Nevada.
The luxury housing market’s resilience reinforces the K-shaped recovery trend—where affluent buyers continue to thrive, while first-time and middle-income buyers struggle with affordability.
🤝 What This Means for Buyers and Sellers
This report confirms what we’ve been seeing in recent months: the market is shifting, but it’s highly segmented by price range and location.
For Buyers:
🔹 If you’re in the market for a home, you now have more leverage—especially in price ranges below $1M, where sales have cooled and homes are selling below list price.
🔹 Take advantage of rising inventory to shop around and negotiate better terms. Many sellers are willing to offer concessions, including rate buydowns and closing cost assistance.
🔹 If you’re looking at luxury properties, expect continued competition in high-demand areas.
For Sellers:
🔹 If you’re selling in the luxury segment ($1M+), you’re in a strong position, as demand is outpacing supply. However, pricing competitively is key—overpriced homes will still sit on the market.
🔹 In mid-tier and entry-level price points, sellers should be prepared for longer listing times and more negotiations. Strategic pricing and staging are critical to attract buyers.
🔹 Consider offering buyer incentives like closing cost assistance or rate buydowns to make your listing more competitive.
🏡 Looking Ahead: What’s Next for the Housing Market?
We’ll be closely watching how these trends develop over the next few months. With more inventory hitting the market and buyer activity still sluggish in many areas, expect:
📉 A continued decline in days on market as buyers gain leverage.
📈 More price adjustments, particularly in mid-tier and entry-level markets.
🧐 Interest rates playing a bigger role in buyer behavior—if rates dip further, demand could rebound.
If you’re thinking about buying or selling, now is the time to evaluate your strategy carefully. The right approach depends on your price point, location, and financial goals.
📞 Contact Abdo Pierre Faissal for unparalleled real estate service.
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