Home sales are going down as the price continues to rise in nominal terms, that is, before taking inflation into account. But after adjusting for inflation, the price of the typical home has fallen more than five percent over the past year.
Many analysts had expected the median home price to fall significantly over the past year as mortgage interest rates rose over the last year, making it harder to borrow to buy a home. But although that has happened in some regions, nationally, the average home price continues to rise in nominal terms, while falling modestly after adjusting for inflation. For people who pay cash, homes are a little less expensive after inflation than they were a year ago, because their price is lower after inflation. But people who take out a mortgage to pay for a house have found it more costly to buy a house than it was back in 2021, because their mortgage payments are now much higher to pay for the increased interest rate on the mortgage.
Sales of existing homes fell for the twelfth straight month as the median existing-home price rose for a record 131th straight month, year over year. Sales last month were down 0.7% from the prior month’s level, and down 37% from January of 2022. Sales fell from a year ago in all four regions of the country.
The median existing-home price for all housing types in January was $359,000, an increase of 1.3% from January 2022 ($354,300), as prices rose in three out of four U.S. regions, while falling in the West. In nominal terms, the median existing-home price has now risen for 131 consecutive months, year-over-year, the longest-running streak on record. After adjusting for inflation, though, home prices have fallen since late 2021.
The inventory of unsold existing homes grew from the prior month to 980,000 at the end of January, up 2.1% from December and 15.3% from one year ago (850,000). Meanwhile, mortgage rates are rising:
“According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.32% as of February 16. That’s up from 6.12% from the previous week and 3.92% one year ago.”
Higher mortgage interest rates aren’t just discouraging first-time buyers. At double their 2021 levels, today’s mortgage rates are discouraging some current homeowners from putting their homes on the market, Nationwide Senior Economist Ben Ayers told Fox Business:
“Sellers remain reticent to jump into the down market with new listings so far in 2023 running behind 2022 and 2021.
“The vast majority of homeowners have a mortgage rate below 4%, making a swap to current rates a tough pill to swallow. As such, the supply of existing homes on the market remains near historic lows, further limiting transactions across the market.”