What Happened To Home Sales?

The Real Estate Espresso Podcast

What Happened To Home Sales?

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What Happened To Home Sales?

Welcome to the Real Estate Espresso podcast, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce.

Mainstream headlines are saying home sales have slowed, and on the surface, that’s true. January’s existing home sales number came in down 8.4 percent from December to a seasonally adjusted annual rate of about 3.91 million units, according to the National Association of Realtors.

But here’s the question I want to explore today: Did demand actually slow, or did unusually cold January weather interfere with the mechanics of completing transactions in a way that makes the data look worse than the underlying reality?

The National Association of Realtors’ Chief Economist, Lawrence Yun, explicitly said that below normal temperatures and above normal precipitation in January make it harder than usual to assess the underlying driver and whether the month’s numbers are an aberration. That’s an important admission because it highlights something most media reports ignore: housing data is not a pure read of demand; it’s a read of completed activity, and completions are sensitive to weather.

Let’s talk about how weather hits the housing machine.

First, showings and open houses get canceled. Buyers do not like trudging through snowbanks to tour five properties in a day. Sellers do not want strangers walking slush through their home. Agents are less likely to schedule stacked tours when the roads are risky.

Second, inspections, appraisals, and repairs get delayed. If an inspector cannot access a roof, if a septic cover is frozen in, if a driveway is impassable, the inspection window slips. Appraisers also have trouble getting out to properties in volume. Those delays translate into closing delays.

Third, lenders and title companies get backed up, and winter storms lead to office closures, staffing disruptions, and slower processing times. Even if the buyer and seller are ready, the transaction can stall.

Fourth, the moving decision itself gets postponed. People try not to move in extreme weather. If you have kids, you are not excited to relocate in the middle of a deep freeze.

And this January, there were some very real weather events. NOAA’s monthly climate reporting points to a notable cold period late in the month into early February, with extremely low temperatures in parts of the country. NASA’s Earth Observatory also highlighted frigid temperatures lingering across a large swath of the U.S. in late January.

Now, if you want a clean, high-frequency indicator that is sensitive to weather, look at mortgage applications. The Mortgage Bankers Association reported a sharp drop in purchase applications and tied it directly to winter storm impacts, saying many of the country was snowed in, hampering home-buying activity.

So, have home sales really slowed? Existing home sales are closings, not contracts. Thank you, Neal Rownell. Closings are the last step in a pipeline. Reuters noted that January sales largely reflected contracts signed in late 2023 before January’s severe weather. That tells us weather might not be the only factor. Affordability and inventory still matter, and the market has been sluggish for a while, but weather can easily pull closings from late January into February, or from February into March.

This is where seasonality and timing matter. When a storm hits in the final week or two of January, you can see an outsized effect in monthly closings because there’s not much time to make it up inside the same reporting month. If the deal doesn’t disappear, it simply gets delayed.

So will February and March show a rebound? They might, but it depends on whether we are talking about a rebound in closings, or a rebound in actual demand. If demand is stable and the January number was suppressed by operational disruption, you often see a snapback in the following one or two months as delayed transactions close. February may capture some of January’s delayed closings. March can capture February delays plus the typical spring pickup.

But if demand is genuinely soft because of affordability, limited resale inventory, or consumer confidence, then the rebound will be muted. January could be both: weather disruption on top of an already constrained market.

So what should you watch? Watch pending sales and mortgage purchase applications for the next few weeks. If those recover quickly after the weather normalizes, that suggests pipeline strength. Watch days on market and cancellation rates, too. And watch new listings. Spring inventory will be a tell for whether sellers are reentering the market as conditions improve.

The media wants a simple story: home sales slowed. The more accurate story might be the transaction pipeline got iced.

Now before you leave, today’s podcast episode was an experiment. The podcast sounded like me, even to me, but it was not me. It was actually a synthesized version of my voice using artificial intelligence. This is the technology of ElevenLabs at work. I provided about 30 minutes of recorded audio of myself in order to train the AI to create a voice that sounds like me.

I’d like feedback from you, the listener. Drop me an email at victor@victorjm.com and let me know if you could tell it was not me. Maybe you thought it was actually me talking. Let me know that as well. I’d like to know either way.

Let me be clear. I have no intention of stopping recording the podcast live.

As you think about that, have an awesome rest of your day. Go make some great things happen. We’ll talk again tomorrow.

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