Key Takeaways
- Home sales fell 8.4% in January, the biggest monthly decline since February 2022, driven by snowstorms, low consumer confidence, and elevated home prices.
- The economy added 130,000 jobs in January, the strongest job growth in over a year, but the gains were heavily concentrated in healthcare—and the Fed is likely to hold rates steady.
- Financial stress is spreading to higher earners. The average person seeking credit counseling now earns $70,000/year—up from $40,000 before the pandemic. Delinquencies are at their highest level since 2017.
- Governor Shapiro unveiled Pennsylvania’s first-ever Housing Action Plan, with $1 billion in infrastructure investment and modernized zoning rules.
Home sales stumble: What January’s numbers mean
The housing recovery hit a speed bump. Existing home sales fell 8.4% in January to a seasonally adjusted annual rate of 3.91 million—the sharpest monthly decline in nearly four years. Economists had expected a much smaller 4.6% dip.
What happened?
January snowstorms kept buyers home, but the weather wasn’t the whole story. Consumer confidence remains weak, home prices are still elevated, and mortgage rates above 6% are making buyers more selective. The typical home sat on the market for 46 days in January, up from 41 days a year ago.
“Improving affordability should have brought more people to the market,” said NAR chief economist Lawrence Yun. “The sentiment about the economy is not there, and of course home buying does require some degree of people’s comfort levels, confidence, to enter the market.”
The silver lining:
- Mortgage rates are sitting around 6.1%, down from 6.9% a year ago
- The typical monthly payment (20% down, excluding taxes/insurance) fell 8.4% from a year ago to $1,733
- Almost two-thirds of buyers in 2025 paid below listing price, according to Redfin
- Inventory is up 3.4% from January 2025, giving buyers more options and time to decide
The median existing-home price rose to $396,800, up 0.9% from a year ago—a sign that while the market is cooling for sellers, prices remain supported by limited supply.
Lancaster County perspective
As we’ve covered in recent weeks, Lancaster County continues to hold up better than the national numbers suggest. Our market isn’t immune to these trends, but the Northeast has consistently outperformed the South and West. Spring is right around the corner—historically the most active season for home sales—and we expect activity to pick up locally as the weather improves.
What this means for buyers:
- Don’t let the headline scare you. Fewer competing buyers means more negotiating power for you
- Homes are sitting longer, which gives you time to make thoughtful decisions
- If you’ve been waiting, the combination of lower rates and less competition makes this a window worth exploring
What this means for sellers:
- Pricing your home right from day one is more important than ever. Overpriced homes are sitting
- Seller concessions, like covering closing costs, are becoming more common, not the exception
- Spring is coming. If you’re planning to list, now is the time to prepare
January jobs report: Strong headline, mixed underneath
The U.S. economy added 130,000 jobs in January, blowing past the 55,000 economists expected and marking the strongest month of job growth in over a year. The unemployment rate dipped to 4.3% from 4.4% in December. Wages rose.
Sounds great, right? Let’s look a little deeper.
Where the jobs actually came from:
- Healthcare and social assistance drove the bulk of the gains—these jobs tend to grow regardless of the economy’s overall health
- Construction added 33,000 jobs, largely tied to data center demand
- Manufacturing added workers for the first time in over a year
Where jobs were lost:
- Financial services and information sectors shed 34,000 jobs
- Trade, transportation, and utilities lost 9,000 jobs combined
- These are typically higher-paying positions—not a great sign
The bigger picture is sobering. Government revisions show the U.S. added just 181,000 jobs in all of 2025, compared to the previously estimated 584,000. That’s a massive downward revision that reveals just how sluggish hiring has been.
What does this mean for interest rates?
This report likely cements the Fed’s decision to hold rates steady for the foreseeable future. After three consecutive cuts late last year, the Fed paused in January—and this jobs data doesn’t give them a reason to cut again soon. For mortgage rates, that means we’re probably looking at a sideways environment for the near term. Rates around 6% may be our reality for a while.
“It does look like the labor market is beginning to heal from the trauma we saw it go through last year,” said Diane Swonk, chief economist for KPMG. But many companies are still cautious and unclear about what economic policy will look like this year.
Financial stress is spreading—and it’s not just low-income borrowers anymore
This is the story I want to spend some time on because it directly affects what we see at Mortgage Craft every day.
According to the National Foundation for Credit Counseling, the average person walking into a credit counseling agency now earns $70,000 a year with $35,000 in unsecured debt—that’s half their annual income. Before the pandemic, the typical counseling client earned $40,000 with $10,000 in debt.
The numbers that should concern all of us:
- U.S. household debt in some form of delinquency rose to 4.8% in Q4 2025—the highest since 2017
- 13% of FHA mortgage holders aren’t current on their loans, with a big increase in FHA loans entering foreclosure
- Credit card and auto loan serious delinquencies are near highs last seen during the 2008-09 financial crisis
- Credit counseling agencies saw double-digit enrollment increases last year
“We are seeing a disturbing shift from discretionary debt to survival debt,” said NFCC CEO Mike Croxson. “When the financial buffer runs out, the climb in stress isn’t gradual—it’s vertical.”
What we’re seeing at Mortgage Craft
We’re seeing this play out in real time when we pull credit for pre-qualification. More and more borrowers have delinquencies on student loans, car payments, and credit cards that are impacting their ability to qualify for a mortgage. This isn’t just a low-income problem anymore—it’s affecting people who earn solid incomes but have taken on too much debt.
What this means for buyers:
- Stay current on all your bills. A single 30-day late payment can derail a mortgage application
- If you’re carrying high-interest credit card debt, talk to us about strategies to improve your debt-to-income ratio before you apply
- Being financially disciplined now puts you in a stronger position when spring inventory hits the market
What this means for sellers:
- A growing number of potential buyers are being knocked out of the market by credit issues. This shrinks your buyer pool
- Realistic pricing is essential. The buyers who can qualify are being selective
What this means for financial advisors:
- If your clients are considering a home purchase, now is the time to review their full debt picture—not just their savings. Debt-to-income ratio is king in mortgage lending
- The FHA delinquency data (13% not behind on payments) is worth discussing with clients who used FHA financing in recent years
Pennsylvania’s first-ever Housing Action Plan
In local news that could have a meaningful long-term impact, Governor Shapiro unveiled Pennsylvania’s first-ever comprehensive Housing Action Plan yesterday. The state projects it will fall short by 185,000 homes by 2035 without action.
Key highlights of the plan:
- A $1 billion infrastructure investment initiative to build and preserve more housing
- Modernized zoning rules and streamlined permitting to reduce development costs and delays
- Renter protections including caps on application fees and fair-chance housing reforms
- Protections for manufactured homeowners limiting annual lot rent increases
- Transfer-on-death deeds for primary residences to help families avoid costly probate and preserve generational wealth
- A new Deputy Secretary for Housing at DCED to oversee the plan’s implementation
Over 1 million Pennsylvania households currently spend more than 30% of their income on housing, and more than half of the state’s housing stock is over 50 years old. The older the inventory, the more costly it is to maintain.
Why this matters for Lancaster
Lancaster County’s housing market has been tight for years. More supply, whether through new construction or preservation of existing housing, would help moderate price growth and create more opportunities for buyers.
This plan is still in its early stages and will need legislative support to move forward, but it’s encouraging to see the state recognizing that housing affordability is a priority that needs coordinated action.
Bottom line
This week’s data paints a picture of a housing market in transition. Sales stumbled in January, but that’s partly weather and partly a market adjusting to a new normal of higher prices and rates above 6%. The jobs report was stronger than expected on the surface, but dig deeper and the picture is mixed—and the Fed isn’t likely to cut rates anytime soon.
The most important story this week, in my opinion, is the growing financial stress among American households. We’re not in crisis territory, but the cracks are widening and they’re reaching further up the income ladder. If you’re planning to buy, the best thing you can do is get your financial house in order now so you’re ready to buy when the right opportunity comes.
Spring is almost here. Let’s make sure you’re prepared.
