The U.S. housing market is facing a startling reality: a potential new crisis. In January, home sales plummeted by over 8%, a shocking decline that has experts concerned. But is it really a crisis? Let's unravel the situation.
The National Association of Realtors (NAR) data reveals that sales of existing homes took a significant hit, dropping 8.4% from December to an annualized rate of 3.91 million. This figure is 4.4% lower than January 2025, marking the slowest sales pace in over a year and the steepest monthly decline since early 2022.
Here's the catch: these sales reflect contracts signed in November and December when mortgage rates were relatively stable. The average 30-year fixed mortgage rate, now at 6.1%, was slightly lower then, according to Mortgage News Daily.
NAR's Chief Economist, Lawrence Yun, has a different perspective. He argues that while affordability is improving due to wage increases outpacing home price growth and lower mortgage rates than a year ago, the supply side is not keeping up. This imbalance is what Yun refers to as "a new housing crisis."
But is it a crisis when home prices are still rising? The median home price in January hit a record high for the month at $396,800, a 0.9% increase year over year. This stability is keeping homeowners financially secure, with a typical homeowner gaining $130,500 in housing wealth since January 2020.
However, the market dynamics are complex. Inventory, while lower in January compared to December, was still 3.4% higher year over year. With 1.22 million homes for sale, the market is technically balanced, but the distribution of sales is intriguing.
Homes priced above $1 million are the only segment with positive growth compared to last year, while sales of homes below $250,000 have taken the biggest hit. This suggests a market favoring the higher end, leaving many potential buyers struggling to enter the market.
And this is where it gets controversial. Yun believes Americans are stuck, unable to move due to limited supply and affordability concerns. But with home prices rising and homeowners gaining wealth, is it a crisis for all? Share your thoughts in the comments: Is the U.S. housing market in crisis, or is it a tale of two markets, one thriving and the other struggling?
