The median U.S. home sale price rose 1.1% year over year in January to $422,921, as a strong buyer’s market kept a lid on price growth.
Annual price gains have remained below 2% for 10 straight months, a sharp slowdown from the double-digit increases seen during the pandemic.
Buyers are gaining negotiating power, with homes selling for an average of 2.1% below list price and fewer properties attracting bidding wars.
There’s good news and bad news for would-be homebuyers. Home prices continued to rise in January, but the increase was small.
According to a new report from Redfin, the median home sale price climbed 1.1% from a year earlier in January to $422,921. While still a record high for the month, the modest increase reflects a market that has shifted firmly in favor of buyers.
“Home prices grew so fast for so long that a lot of buyers got shut out of the market, which is now causing price growth to cool,” said Redfin Senior Economist Asad Khan. “With far more homes for sale than people who want to buy them, the buyers who are in the market have the power to negotiate on price, which is keeping price growth in check.”
Increased negotiating power
In a buyer’s market, sellers outnumber buyers, giving shoppers more options and greater negotiating leverage. In January, the typical home sold for 2.1% less than its final list price—the biggest January discount since 2023. Just 20.8% of homes sold above list price, the lowest share for the month since 2020.
Still, improved negotiating conditions have not been enough to spark a sales rebound.
Pending home sales fell 0.9% in January from the previous month to their lowest seasonally adjusted level since November 2023.
Existing-home sales dropped 3.6% month over month to a seasonally adjusted annual rate of 4.2 million, marking the steepest decline since late 2022. Overall home sales declined 2.3%—the largest monthly drop in more than two years.
Illusive affordability
Affordability remains a key hurdle. Although price growth has cooled and mortgage rates have dipped, borrowing costs remain significantly higher than pandemic-era lows. The average 30-year fixed mortgage rate fell to 6.1% in January, its lowest level since 2022, but still more than double the record lows seen earlier in the decade.
Wages, however, are rising faster than home prices. Earnings increased 3.7% year over year in January—more than triple the pace of home-price growth. Redfin economists predict that affordability will improve in 2026 if income growth continues to outpace price gains.
For now, many buyers are waiting on the sidelines, hoping rates will fall further. Economic uncertainty and severe winter storms in parts of the country also dampened activity in January.
Nearly 40,000 home purchase agreements were canceled during the month, representing 13.7% of homes that went under contract—the highest January share since at least 2017.