What happened: Existing home sales increased again in January, likely attributed to homes that entered into contracts in the preceding two months. The decline in mortgage rates in November and December may have contributed to the increase in home sales. The number of homes for sale has also increased when compared to last January. Unsold inventory sits at a 3.0-month supply at the current sales pace, up from 2.9 months in January 2023.
What Zillow Senior Economist Orphe Divounguy thinks: Housing affordability remains the biggest challenge for many existing homeowners and potential homebuyers. Mortgage rates soared to the highest level in 23 years in October before easing at the end of the year.
However, easing mortgage rates at the end of the year brought buyers – and some sellers – back into the market. The flow of existing homes onto the for-sale market has continued to improve on a year-over-year basis. Zillow data shows new listings are now up 6% while the number of homes for sale has also increased by 3% when compared to a year ago. The housing market was supply constrained in 2023 and the increase in supply bodes well for potential home buyers and housing sales this spring.
Despite these improvements, the housing market remains supply constrained. The lack of existing homes on the market provides an opportunity for builders to fill the gap. Builders are offering incentives such as rate buy-downs to make the math work for prospective buyers.