Prospective homebuyers and sellers remain cold, wary and economically pressured this winter, as the latest data from the National Association of REALTORS® (NAR) showed a not-insignificant 4.6% drop in pending transactions in January, with economists continuing to point at affordability as the biggest long-term barrier to more activity.
Pending sales were also down 5.2% from last year, when mortgage rates were almost exactly where they are now, indicating that there are other factors at play as mostly resilient demand for homes may finally be slowing in many places.
“Housing affordability has not improved considerably in years as still-limited home supply keeps prices elevated and stubborn inflation applies upward pressure on interest rates,” said Realtor®.com Sr. Economic Research Analyst Hannah Jones in a statement. “Moreover, many areas with high demand see relatively low for-sale inventory, which limits progress towards more home sales.”
Recent surveys of consumers and other forward-looking economic indicators also appear to show consumers are not feeling optimistic about the economy in general, as the threat of tariffs and other disruptive policies from the Trump administration have contributed to broad uncertainty in the near- and medium-term
NAR Chief Economist Lawrence Yun said in a statement that while affordability was indeed an issue, a thaw in the cold weather might unleash some pent-up inventory and demand shortly.
“It is unclear if the coldest January in 25 years contributed to fewer buyers in the market, and if so, expect greater sales activity in upcoming months,” he said. “Even a slight reduction in mortgage rates will likely ignite buyer interest, given rising incomes, increased jobs and more inventory choices.”
Sales have remained far below historical averages since the Federal Reserve cranked up interest rates in 2022, and while housing economists continue to emphasize the market is on an upward trajectory, the numbers have stayed flat over the last two years, a little over 4 million in both 2023 and 2024.
Historically, sales have averaged closer to 5 million, peaking at an annualized rate of almost 7 million at the height of the pandemic in late 2020.
When (and where) a thaw might come is not certain. According to NAR’s data, pendings were actually essentially flat in the Northeast—up 0.3% from the previous month. The South saw the largest dip, down 9.2% from the previous month and lower by 8.8% year-over-year.
The Midwest and West both saw small dips in pending—lower by 2.7% and 4.5% from the same time in 2024.
Notably, the South and the West have faced major climate-related disasters in the form of wildfires and hurricanes, and both regions are more deeply affected by a crisis in homeowner’s insurance costs.
According to Jones, the region that is able to acquire inventory is where a spring market is most likely to bloom and thrive.
“Housing affordability has not improved considerably in years as still-limited home supply keeps prices elevated and stubborn inflation applies upward pressure on interest rates,” she explained. “More for-sale inventory has the potential to generate more contract signings, but climbing home supply is not evenly distributed across the U.S.”
