The housing market’s prolonged freeze continued into 2025 after posting two of its worst years since the 1990s with affordability a major challenge for buyers to navigate.

Existing home sales fell 4.9% in January to an adjusted rate of 4.08 million, the National Association of Realtors (NAR) said on Friday. Sales increased 2% compared to last year, the fourth consecutive month of a year-over-year improvement.

Improvements in sales come as inventory has shown modest signs of expanding with more homeowners opting to put their places on the market with interest rates stuck in neutral. Total inventory was up 16.8% in January compared to a year ago and 3.5% from December in a shift that could help slow the rate at which prices increase. Unsold inventory was at a 3.5-month supply at the current sales pace.

While it is a welcome change for weary buyers, it is still well below the pace of a balanced market of a five- to six-month supply.

“More housing supply allows strongly qualified buyers to enter the market,” NAR Chief Economist Lawrence Yun said. “But for many consumers, both increased inventory and lower mortgage rates are necessary for them to purchase a different home or become first-time homeowners.”

There have been no signs of price relief for buyers over the last two years of the housing market’s slump with prices consistently moving upward and mortgage rates around 7%. High mortgage rates add hundreds of dollars to monthly mortgage payments and are pricing many would-be buyers out of the market when combined with increasing list prices.

Average rates for the most common type of home loans, 30-year, fixed-rate mortgages, have slipped below 7% for five consecutive weeks but are still much higher than what was available during the pandemic housing boom. At 6.85% as of Thursday, many homeowners are opting to stay put instead of listing their homes on the market, and buyers are waiting in hopes of finding some cost relief down the road.

The median existing home price in January was $396,900, up 4.8% from a year ago and the 19th consecutive month of increases. Constantly increasing home prices are good for current owners who can cash in on equity. But higher prices have created insurmountable financial challenges for many first-time buyers, which were the smallest share of transactions ever recorded in 2024.

A family earning the national median income needs to spend nearly 40% of its income to afford a home, a statistic that has soared compared to before the pandemic. The financial situation is even more dire for low-income families who make 50% of the median income, having to spend 74% of their earnings to afford a typical mortgage payment on an existing home, according to the National Association of Home Builders.

The high-rate environment is also hurting the market for sales of newly built homes and keeping projects from getting started altogether. Housing starts plummeted in January along with a dip in builder confidence tracked by the NAHB because of high rates and uncertainty over tariffs that could further increase supply costs and be added to sales prices.

Home construction is particularly vulnerable to tariffs and trade wars with high-demand items like lumber, steel and concrete being unavoidable costs in building that can quickly add up for builders and get passed onto buyers.

The industry has pushed for the Federal Reserve to continue to cut interest rates and is running into a skeptical central bank still trying to get the remnants of pandemic-era inflation worked out of the economy. It also is concerned about the effects the White House’s trade policy will have on prices.

Mortgage rates have largely been stagnant despite three rate cuts last year because they tend to follow the yields on long-term bonds that are elevated because of economic and tariff uncertainty.

In his semiannual appearance to Congress earlier this month, Fed chair Jerome Powell said mortgage rates could drop once the central bank gets back to making cuts, but the timing of that is uncertain. Some economists have started to shift predictions to fewer or no cuts to come this year after inflation moved back up to 3% last month.

“We’re clearly having an effect on the on that housing market, and that’ll unwind as we normalize policy, but we’re still going to be faced with high insurance costs and high material costs and labor shortages and all the things that keep driving housing prices up across the country,” Powell said.

Home insurance and property taxes are also adding to the cost of owning a home and are expected to continue to climb.

Natural disasters and more parts of the country being at risk of severe weather have wreaked havoc on the home insurance market, causing some major companies to back out of disaster-prone states entirely and increasing costs for everyone as they try to spread out risk across their pool of customers. Property taxes have steadily climbed along with sales prices.

Have a news tip? Contact Austin Denean at atdenean@sbgtv.com or at x.com/austindenean.