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Mortgage rates wreaked havoc on the market in January, as buyers and sellers continued to suspend their real estate plans in the hopes of coming interest rate cuts. Consumers’ skittishness resulted in a 17.5 percent decline in net new listings and a 2 percent decline in contract signings compared to January 2023, according to home valuation platform HouseCanary on Monday.
Homesellers placed 131,050 net new listings (i.e. new listings minus listing removals) on the market in January, down from 158,192 net new listings the previous year. Meanwhile, homebuyers signed 186,284 contracts during the month — down from 190,045 in January 2023.
“In December, we saw a slight increase in year-over-year listings as potential buyers and sellers became slightly more comfortable with slightly lowered interest rates. These trends did not, however, continue into the new year,” the report read. “New listings and contract volume are trending at multi-year seasonal lows, and both down compared to January 2023.”
The decline in net new listings happened across the market; however, homesellers within the $200,000 to $400,000 price bracket had the biggest retreat with an annual decline at -24.7 percent.
Net new listings for homes worth between $0 and $200,000 (-18.4 percent), homes worth $400,000 to $600,000 (-16.5 percent) and $600,000 to $1 million (-6.5 percent) also took a tumble. The only price bracket to experience a boost in net new listings were homes priced at $1 million or more (+5.8 percent).
On the homebuyer side, contract signings only declined for homes worth between $0 and $200,000 (-4.6 percent) and $200,000 to $400,000 (-6 percent). Meanwhile, activity from buyers shopping at the higher end of the market remained robust, with contract signings for homes worth $400,000 to $600,000 (unchanged at 0 percent), $600,000 to $1 million (+4.5 percent) and $1 million or more (+11.7 percent), outperforming January 2023.
Despite the declines in net new listings and contract signings, HouseCanary said current total inventory levels are up 7.9 percent from 2023 and up 24.8 percent from 2022. However, at the current sales pace, the U.S. has 4.8 months of inventory — still placing the market squarely within sellers’ hands.
Looking forward, HouseCanary said the Federal Reserve’s current strategy doesn’t lend itself to breaking the year-long mortgage lock-in effect. Although real estate leaders are hoping rates will fall to the 5 percent range, HouseCanary said rates will likely continue to hover between 6.5 percent and 7 percent for most of the year.
“While inventory is up compared to January of last year, it still remains very low from a historical perspective,” the report read. “With the Federal Reserve indicating that rates will stay at current levels as inflation remains above their 2 percent target and dashing hopes of a March rate cut, there remains little incentive for potential buyers and sellers to abandon their current mortgage rates.”
