Home Sales Nosedive in January Despite Easing Mortgage Rates

Sales of previously owned homes in the U.S. fell sharply in January even as mortgage rates touched a three-year low, raising questions about the housing market ahead of the spring buying season.

Existing-home sales dropped 8.4% last month from December to a seasonally adjusted annual rate of 3.91 million, the slowest sales pace in more than two years, the National Association of Realtors® reported Thursday. The January figure was also down 4.4% from a year earlier.

Closings on existing homes plunged despite notable easing in mortgage rates, which averaged 6.1% for the month, the lowest since late 2022, according to Freddie Mac.

"The decrease in sales is disappointing," says NAR Chief Economist Lawrence Yun. "The below-normal temperatures and above-normal precipitation this January make it harder than usual to assess the underlying driver of the decrease and determine if this month’s numbers are an aberration.”

Severe winter weather did impact the eastern U.S. in the final week of January, potentially delaying some closings. However, January 2026 was the 11th-driest on record since 1895 nationally, according to federal records, and was an unusually warm month in the West.

On a regional basis, the West saw the biggest decline in home sales last month despite the lack of weather impact, with sales there falling 10.3% from January and declining 7.9% from a year ago.

"It's really puzzling," Yun said on a call with reporters. "The West region had no weather impact, and they saw the largest decline. So it is puzzling."

Despite the slowdown in sales, home prices continued to rise, with the median existing-home sales price ticking up 0.9% from a year ago to $396,800.

“Due to low supply, the median home price reached a new high for the month of January,” says Yun, who estimates that since January 2020, a typical homeowner has accumulated $130,500 in housing wealth.

However, the flip side of steadily rising prices is an affordability crisis that has weighed down the housing market for three straight years, locking many young families out of homeownership.

Yun says the latest sales figure may reflect the so-called "K-shaped economy" in which middle- and lower-income Americans are struggling to stay afloat, while the wealthy continue to make gains.

"It's a clear case of have and have-not, homeowners versus those who don't own a home. So one may even say this is almost like a housing crisis of sort," says Yun. "Today, we have minimal foreclosures. Housing wealth continue to build up. It's just that the renters who want to become homeowners are finding difficulty, at least according to the low sales number."

Inventory and affordability improve slightly

The supply of existing homes for sale at the end of January was 1.22 million units, down 0.8% from December following typical seasonal trends but up 3.4% from January 2025.

Combined with the slower sales pace, that equaled a 3.7-month supply of unsold inventory, an improvement from 3.5 months in December and one year ago.

Affordability improved across all regions as lower mortgage rates and higher incomes combined to improve buyer purchasing power, even as prices rose slightly.

"Although the data show a lackluster start to the year for transactions, buyers and sellers have reasons for optimism," says Realtor.com® Chief Economist Danielle Hale.

Still, the same trends that have weighed on the housing market for three years continue to impact both buyers and sellers, says Bankrate Housing Market Analyst Jeff Ostrowski.

"Owners aren’t keen to put their homes on the market, as the mortgage rate lock-in effect remains in place and soft prices in some areas causes sellers to pull their homes off the market," Ostrowski says. "And first-time buyers aren’t feeling motivated to jump in."

Bright MLS Chief Economist Lisa Sturtevant expects conditions to improve somewhat for buyers heading into the spring housing season.

"Buyers will find a more favorable market as we head into spring," she says. "More inventory, lower rates and slower price growth will give buyers more room for negotiation. Snowy weather in January could have delayed buyers a bit, but it is likely we will see more home shoppers out early this spring."