Industry observers entered the new year with the general understanding—and expectation—that the struggles in the U.S. housing market would continue, at least for the first half of the year. And while the latest numbers provided by several sources by no means indicate that a recovery in housing is imminent, there’s definitely a silver lining in the data.
The first bright spot, economists say, is movement in the existing home sales numbers. According to the National Association of Realtors (NAR), existing home sales in January—the latest period for which sales numbers are available—rose 3.1% month over month to a seasonally adjusted rate of 4 million. Among the four major U.S. regions, month-over-month sales accelerated in the Midwest, South and West but remained steady in the Northeast. Year-over-year, sales improved in the West, but decreased in the Northeast, Midwest and South.
“While home sales remain sizably lower than a couple of years ago, January’s monthly gain is the start of more supply and demand,” said Lawrence Yun, NAR chief economist. “Listings were modestly higher, and home buyers are taking advantage of lower mortgage rates compared to late last year.”
Other economists are encouraged by the trend. “That’s the best level since August 2023,” said El-liot Eisenberg, the “bowtie economist” and founder of Graphs & Laughs. At the same time, he acknowledged existing home sales were down 1.7% year over year.
Eisenberg noted home prices rose 5.1% in January year over year to $379,100—the highest January price ever. But the best news, he said, is inventories (while still painfully low) are up 3.1% year over year, while new listings rose year over year for the fourth straight month.
“The worst is probably over,” he said.
There’s even some encouraging news on the housing front as it pertains to starts—arguably the hardest hit segment of the market since inflation began its meteor-ic rise. While total housing starts in January fell 15% month over month and almost 1% year over year, Eisenberg said “that misses the point entirely. Single-family starts slid 4.7% month over month but are up 22% year over year. Also, single-family permits rose 1.6% month over month and 36% year over year. Single-family activity is strong and growing.”
Unfortunately, the same cannot be said for the multifamily segment of the market. Eisenberg cited data showing multifamily starts fell 36% month over month and 38% year over year. With respect to permits, multifamily applications fell 9% month over month and 27% year over year. “Multifamily continues to rapidly contract,” he said.
Eisenberg is not the only market-savvy economist who believes housing’s worst days are behind us—at least in terms of the current business cycle. Bri-an Beaulieu, chief economist with ITR Economics, said “housing has already gone through its slump.” As evidence, he cited the firm’s analysis of housing starts over a three-to-12-month rate of change. Housing starts have been following the path to a 26- plus percent increase year over year for the last three months, he noted. Meanwhile, the 12-month moving average is rising. “It’s up 8.3%, which is a little bit faster than the median increase,” Beaulieu said. “So, it’s a good rise going on in housing.”
While Beaulieu said the Federal Reserve—whose rate moves directly impact mortgage rates— is not likely to act on this information just yet, he does say what we’re seeing in housing, and where the market is trending, is an indicator worth watching. “We think the Fed is going to wait for some more data to fall before they make any moves,” he explained. “We need to keep in mind, when you’re watching this data, that housing is telling us about what’s going to be happening more like late ’24 or 2025.”
