According to the National Association of Realtors (NAR), existing-home sales fell in January for the second month in a row. What's more, year-over-year sales saw their steepest decline in over three years. Sales declined both monthly and annually in every region across the country.

More Buyers but Fewer Homes
According to Lawrence Yun, chief economist for the NAR, buyer traffic increased from the same time a year earlier. Yet despite buyer interest, sales were muted overall. The reason is a severe inventory shortage. Inventory in January climbed to 1.52 million listings available for sale, a month-over-month increase of 4.1 percent. However, this is still 9.5 percent fewer homes available for sale than January 2017, when listings reached 1.68 million. For the past 32 months, inventory has seen year-over-year declines. At the current sales pace, current inventory levels would stock the housing market for only 3.4 months, down from a 3.6-month supply a year ago. "It's very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth," adds Yun.

Prices Up
As inventory levels dropped, housing affordability took a hit. The median existing-home price in January climbed 5.8 percent year over year to $240,500. For 71 consecutive months, home prices have posted yearly gains. In the West, the median price climbed to $362,600—8.8 percent higher than at the same time last year.

New Homes Wanted
According to Yun, "The underproduction of single-family homes over the last decade has played a predominant role in the current inventory crisis that is weighing on affordability." Inventory levels could see an improvement in the coming months, as new home construction posted gains in January. In addition, home builder confidence is high, according to the National Association of Home Builders/Wells Fargo Housing Market Index. If new home construction increases throughout the year, it could help bring an end to inventory shortages and housing affordability woes.
 
Regional Breakdown
Northeast - Existing-home sales annual rate of 730,000; a decrease of 1.4 percent from December 2017 and 7.6 percent from January 2017

Midwest - Existing-home sales annual rate of 1.25 million; a decrease of 6 percent from December 2017 and 3.8 percent from January 2017

South - Existing-home sales annual rate of 2.26 million; a decrease of 1.3 percent from December 2017 and 1.7 percent from January 2017 

West - Existing-home sales annual rate of 1.14 million; a decrease of 5 percent from December 2017 and 9.5 percent from January 2017.