How is it that those who have been justified in Christ are not sinners and are sinners nevertheless? For Scriptures establishes both facts about the righteous man. John says in the first chapter of his canonical epistle: If we say we have no sin, we deceive ourselves, and the truth is not in us” (1 John 1:8). In the last chapter of the same epistle he says: “We know that everyone who is born of God does not sin, but God’s generation (that is, the fact that he is born of God) preserves him, and the evil one will not touch him” (1 John 5:18). The same writer says in the third chapter (v. 9): “No one born of God commits sin, because His seed abides in him, and he is not able to sin.” Behold, he is not able to sin, says John. Yet if he says he has no sin, he is lying. A similar contradiction may be seen in Job, whom God, who cannot lie, pronounces a righteous and innocent man in the first chapter (Job 1:8). Yet later on Job confesses in various passages that he is a sinner, especially in the ninth and seventh chapters: “Why dost Thou not take away my iniquity?” (9:20; 7:21). But Job must be speaking the truth, because if he were lying in the presence of God, then God would not pronounce him righteous. Accordingly, Job is both righteous and a sinner. Who will resolve these contradictory aspects? Or where are they in agreement? Obviously at the mercy seat, where the faces of the cherubim, which otherwise are opposed to one another, are in agreement. Therefore because righteousness and the fulfilling of the Law have been begun through faith, for this reason what is left of sin and falls short of fulfilling the Law is not imputed to them; for they believe in Christ. When faith has been born, you see, its task is to drive what is left of sin out of the flesh. It does so by means of various afflictions, hardships, and mortifications of the flesh, so that in this way the Law of God gives pleasure and is fulfilled not only in the spirit and in the heart but also in the flesh that still resists faith and the spirit which loves and fulfills the Law, as is beautifully described in Rom. 7:22f. Therefore if you look at faith, the Law has been fulfilled, sins have been destroyed, and no Law is left. But if you look at the flesh, in which there is no good, you will be compelled to admit that those who are righteous in the spirit through faith are still sinners.
Luther, Martin Luther’s Works: Volume 27: Lectures on Galatians 230-231