The number of people signing contracts to buy a home in the U.S. hit a record low in January, despite mortgage rates dipping to their lowest level in more than two months.
The National Association of Realtors reports pending home sales, based on signed contracts for existing homes, dropped 4.6% from December to January, an "all-time low", according to the association.
In a statement, NAR Chief Economist Lawrence Yun said it's unclear if the cold weather much of the country experienced last month contributed to the decline, "if so, expect greater sales activity in upcoming months," he said.
Yun added, "it's evident that elevated home prices and higher mortgage rates strained affordability."
The average rate on a 30-year mortgage slipped slightly to 6.76% from 6.85% last week, according to mortgage buyer Freddie Mac.
This, and other housing data released Thursday, indicates a shift to a buyer's market ahead of the peak spring homebuying season.
"It's been a seller's market for several years, and now it's entering more of a balanced territory," said Joel Berner, a senior economist with Realtor.com.
In its housing market trends report released Thursday, Realtor.com found:
- The number of homes actively for sale grew 27.5% compared to last year, the 16th straight month of growth.
- Newly-listed homes increased 4.2% year-over-year.
- The median price of homes for sale in February fell 0.8% to $412,000.
Berner said the small price drop was due, in part, to a mix effect, "where some smaller, more affordable homes are hitting the market -- ones that were probably purchased a few years ago by people buying a starter home and now looking to move up," he said.
Realtor.com also reports a growing number of listings with price reductions, with 16.8% of sellers cutting prices in the month of February.
While buyers may savor the idea of more inventory mixed with lower prices, potential sellers locked into lower mortgage rates may be reluctant to list their properties.
"Sellers are looking around saying this isn't the same market that we were dealing with a couple of years ago," Berner said.
Where prices could go up is in new construction with President Donald Trump indicating new tariffs on lumber and other materials are possible as soon as April.
"A lot of these builders are saying, 'man, we better get these things on the market now,' because it's going to be more difficult, more expensive to keep building if tariffs come through," Berner explained, "make lumber more expensive, make appliances more expensive and all the finishings that go into a home more expensive."
With no significant changes to mortgage rates or home prices expected in the months ahead, Berner said economists will be monitoring how sellers react to slower market conditions. That means tracking new listings, and price reductions on homes already on the market.
"Trying to get a sense of how the peak buying season for 2025 is going to go," he said.
