US Existing-Home Supply at 2020 High, Sales at 2020 Low

On Thursday, Redfin reported that homebuyers have the most options since 2020, but few are biting because rising housing costs have made monthly payments difficult to budget for.

Pending home sales in January fell to the lowest level on record aside from the start of the pandemic. They dropped 4.2% month-over-month—the largest decline on a seasonally adjusted basis since August 2023—and 6.3% year-over-year.

Meanwhile, active listings of homes for sale rose to the highest level since early in the pandemic. They climbed 0.3% month-over-month on a seasonally adjusted basis in January and 12.9% year-over-year. New listings hit the highest level since July 2022, increasing 1.9% month-over-month and 4.7% year-over-year.

Redfin provides the following reasons for rising supply (listings):

• The mortgage rate lock-in effect is fading. Homeowners who secured ultralow mortgage rates during the pandemic have been reluctant to move to avoid higher rates, but many can’t stay put forever.
• Homes are staying on the market longer. The typical home sold in January was on the market for 56 days—a week longer than a year earlier and the longest for any January since 2020.
• Demand is slowing. Listings are accumulating as fewer buyers enter the market. Existing-home sales fell 1.7% in January to a seasonally adjusted annual rate of 4.3 million, the largest monthly decline since October 2023.

Meanwhile, Redfin says housing demand (sales) are decreasing for the following reasons:

• Mortgage rates hit an eight-month high. The average 30-year fixed mortgage rate rose to 6.96% in January, up from 6.72% in December and the highest since May.
• Home prices continue to climb. The median sale price increased 4.1% year-over-year to $418,581—45% higher than January 2020.
• Deals are falling through. Home purchase cancellations reached the highest January rate since records began in 2017. Around 41,000 purchase agreements were abandoned, representing 14.3% of homes that went under contract, up 13.4% year-over-year.
• Economic uncertainty is impacting the market. Factors such as tariffs, reductions in the federal workforce, return-to-office mandates, and mortgage rate volatility are creating uncertainty. Redfin agents report this is causing hesitation among both buyers and sellers.