US existing home sales missed forecasts in January. Markets expected 4.15 million sales, but the actual figure was 3.91 million.
This is the month-on-month result for existing home sales. It shows that sales activity was weaker than expected.
Housing Market Under Pressure
January’s shortfall confirms that the housing market is still feeling the strain from high borrowing costs. The average 30-year fixed mortgage rate has moved back above 7.1%, and affordability remains a major hurdle for many buyers. We see this as a clear sign that demand is cooling more than expected.
This slowdown also matters for the Federal Reserve. It suggests that the tight policy stance expected through 2025 is having the intended effect. In our view, this weak report increases the chance that the Fed could cut rates sooner than the market had been pricing in. Traders may now assign a higher probability to a mid-year shift, rather than sticking with the “higher for longer” view.
In the weeks ahead, this data supports a bearish outlook for housing-related stocks. We are looking at put options on homebuilder ETFs such as XHB, and on home improvement retailers, since both are closely tied to housing demand. During the slowdowns in 2023 and 2024, these sectors tended to react quickly to negative housing updates.
At the same time, a possible earlier Fed pivot makes falling-rate trades more appealing. This strengthens the case for call options on long-duration Treasury bond ETFs like TLT, which typically benefit when yields drop. Lower rates could also support rate-sensitive tech and growth stocks that have been held back by the high-rate environment.
Market Positioning Implications
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