- Pending sales drop 4.6% to record low
- Mortgage rates exceed 6.9% in January
- Southern markets lead national decline
- Homebuilder stocks plummet up to 17%
- Prices climb for 19th consecutive month
The US housing market faces unprecedented pressure as contract signings for home purchases collapsed to their lowest level ever recorded in January. New data from the National Association of Realtors reveals a market paralyzed by the dual challenges of 7% mortgage rates and relentless price growth, with economists warning of prolonged affordability challenges.
The Southern United States experienced the most dramatic contraction, with pending transactions falling nearly 7% month-over-month. Analysts attribute this regional vulnerability to faster-than-average price growth in Sun Belt markets combined with weaker wage growth compared to coastal regions. Texas and Florida markets accounted for 42% of the Southern decline, reflecting cooling demand in previously hot markets.
Construction industry analysts identify three critical pressure points exacerbating the crisis: material costs have increased 18% since 2022 due to tariff uncertainties, labor shortages persist despite slowing construction activity, and regulatory costs add $25,000 on average to new home prices. These factors contribute to inventory shortages that maintain upward pressure on prices despite declining sales volume.
Financial markets have punished homebuilding stocks mercilessly, with Toll Brothers shares sinking 11% year-to-date. This selloff reflects investor concerns about builders' ability to maintain margins while offering rate buydowns and price concessions. The sector's struggles contrast sharply with commercial real estate performance, suggesting specific challenges in residential market dynamics.
Meteorological factors complicate the January sales picture, as the coldest weather in 25 years potentially delayed buyer activity in Midwest markets. However, Northeast markets defied both climate and economic trends with a 2.3% increase in pending sales, driven by strong performance in Boston and Philadelphia's suburban markets. This regional divergence suggests localized demand fundamentals may override national trends.
Looking ahead, Realtor.com forecasts a 9% improvement in sales activity through spring, contingent on anticipated rate cuts from the Federal Reserve. However, with inventory levels remaining 34% below pre-pandemic averages and construction starts down 12% year-over-year, most analysts predict continued price growth through 2024 despite affordability constraints.