Existing Sales Rise in January as Mortgage Rates Eased

Key Takeaways:

• Existing home sales rose 3.1 percent to a seasonally adjusted annualized rate (SAAR) of 4.00 million in January, according to the National Association of REALTORS® (NAR), the largest one-month percentage increase in 11 months and the strongest pace of sales since August 2023. The months’ supply of homes declined one-tenth to 3.0 as the increase in sales outpaced the 2.0 percent increase in the number of homes available for sale. According to the NAR, the median price of existing homes sold rose 5.1 percent compared to a year ago.
• The minutes from the Federal Open Market Committee (FOMC) showed that “most participants noted the risks of moving too quickly to ease the stance of policy,” while only a “couple of participants” noted downside risks to the economy if policy remained overly restrictive for too long. Regarding the balance sheet runoff, “many participants suggested that it would be appropriate to begin in-depth discussions” as to the pace of runoff at their next meeting.

Forecast Impact:

The gain in existing home sales was in line with our expectations given the decline in mortgage rates in November and December (when most of these sales would have gone under contract) and a pickup in mortgage applications. While we continue to expect a gradual recovery in existing home sales over the course of 2024, we note some downside risk to this forecast as mortgage rates have ticked back up to 6.9 percent, as of the latest Freddie Mac survey, causing mortgage applications to pull back. Rates have responded to the more hawkish Fed stance, which was reiterated in the minutes this week. We currently expect three cuts this year, with the first occurring in June.

Nathaniel Drake
Economic and Strategic Research Group
February 23, 2024