The Balancing Act: High Home Prices, Low Mortgage Rates and the Quest for Inventory

As mortgage rates remain on the lower side, it seems buyers are becoming more comfortable with the idea of higher home prices, as indicated by recent data from the National Association of REALTORS® (NAR). The pace of existing-home sales picked up in January, with buyers overlooking the spike in home prices—hitting record highs—to seize the opportunity presented by the lower mortgage rates and a slight increase in inventory.

According to the latest data from NAR, which encompasses closed transactions of single-family homes, townhouses, condos, and co-ops, there was a 3.1% rise in sales from the previous month in January. However, when compared to the same period last year, sales were down by 1.7%.

Even though the inventory in January was 2% higher than in December, the market is still experiencing a historic housing shortage, maintaining a tight three-month supply. Buyers continue to navigate through a competitive market. The January report from NAR highlighted several key points:

• Home prices have seen a notable increase. The median price for existing homes reached $379,100, marking a 5.1% increase from the previous year. Price hikes were observed across all major US regions. Specifically, the median price for a single-family home in January was $383,500, a 5% increase from last year, while condos sold for a median price of $339,400, up by 5.7%.

• Inventory levels have slightly improved but are still insufficient. The total inventory for existing homes stood at 1.01 million units, up by 3.1% from the previous year. Yet, the national housing stock continues to be low. NAR President Kevin Sears mentioned, "Increased listings are crucial for facilitating movement in the housing market," highlighting the association's support for the More Homes on the Market Act, aimed at reducing the tax burden on home sales to encourage more listings.

• Listings are staying on the market a bit longer. Properties typically stayed on the market for 36 days, an increase from 29 days in December and 33 days from the previous year.