The downward trend in existing home sales held firm in April as rising price tags and mortgage rates continued to strain buyer activity, according to a new report from the National Association of REALTORS® (NAR).
Sales of previously owned homes dipped for the third consecutive month in April, sliding by 2.4% to a seasonally adjusted annual rate of 5.61 million. Year-over-year, sales dropped 5.9%.
Month-over-month sales activity across all four major U.S. regions was a mixed bag as two areas posted gains while the other two experienced waning last month. However, all four regions saw a dip in sales annually.
Single-family home sales were down 2.5% from March to a seasonally adjusted annual rate of 4.99 million. Condos and co-op sales also declined by 1.6% in March to a seasonally adjusted annual rate of 740,000 units in April.
According to NAR experts, the combination of higher home prices and mortgage rates has continued to weigh down on buyer activity, who indicated that the decline in sales activity would likely persist in the coming month and return to pre-pandemic levels.
At the end of April, housing stock hit 1,030,000 units, marking 10.8% from March but a 10.4% decline YoY.
Regional Breakdown:
Northeast
Existing-Home Sales: 670,000 (+1.5% MoM; -10.7% YoY)
Median Price: $412,000 (+8.1% YoY)
Midwest
Existing-Home Sales: 1.31 million (+4.1% MoM; -2.6% YoY)
Median Price: $282,000 (+8.7% YoY)
South
Existing-Home Sales: 2.49 million (-4.6% MoM; -5.7% YoY)
Median Price: $352,100 (+22.2% YoY)
West
Existing-Home Sales: 1.14 million (-5.8% MoM; -8.1% YoY)
Median Price: $523,000 (+4.3% YoY)
The takeaway:
“As we find ourselves in the midst of a massive housing shortage, NAR continues to work with leaders across the private and public sectors to help close this deficit,” said NAR President Leslie Rouda Smith. “As the nation’s largest real estate association, we are urging policymakers to enact zoning reforms, homebuilder incentives, and other necessary regulations to help correct this situation.”
“Higher home prices and sharply higher mortgage rates have reduced buyer activity,” said Lawrence Yun, NAR’s chief economist. “It looks like more declines are imminent in the upcoming months, and we’ll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years.
“The market is quite unusual as sales are coming down, but listed homes are still selling swiftly, and home prices are much higher than a year ago. Moreover, an increasing number of buyers with short tenure expectations could opt for 5-year adjustable-rate mortgages, thereby ensuring fixed payments over five years because of the rate reset. The cash buyers, not impacted by mortgage rate changes, remain elevated.”
“Rising mortgage rates, which first crossed the 5% threshold in April, have kept climbing as the Fed adjusts monetary policy to a less accommodative posture,” said Danielle Hale, chief economist at realtor.com®. “While higher rates are expected to eventually reign in price increases, typical home sale prices grew 14.8% in April as buyers felt pressure on their budgets and urgency to move quickly.
“The number of households interested in becoming homeowners remains high, despite waning confidence that now is a good time to buy. This is especially true among younger home shoppers, who are likely to be first-time buyers and are struggling to save for a down payment as rents continue to hit records, as seen in the dip in first-time buyers to 28% in April. At the same time, seller expectations for higher down payments seem to be rising, fueled by a still-competitive housing market and repeat buyers with relatively more equity at their disposal.
“Homeowners considering a sale this year still hold most of the cards, but will want to keep on top of a rapidly-adjusting market poised for a reset—a real estate refresh. Realtor.com housing data shows that there were fewer homes actively for sale in April than in the year prior, but by the first week of May, the trend flattened. In the most recent weekly data, we saw the biggest yearly jump in active listings since March 2019, as more homeowners decided to sell and more searchers decided to hit pause. The combination of these trends means home shoppers—at least those who can navigate higher mortgage rates and monthly payments – will have more homes to choose from relative to last year, even as options are fewer than before the pandemic.”
“The combination of higher prices and higher mortgage rates continue to negatively impact home sales,” said Joel Kan, AVP of Economic and Industry Forecasting for the Mortgage Bankers Association.
“Although the job market is still extremely strong, emerging signs of economic weakness have also added to the overall uncertainty for potential homebuyers. Steep home-price appreciation was particularly impactful on first-time home buyers, who have seen their share of home sales decrease to 28% compared to 31% a year ago.”
“Inventory is a key component of housing market conditions, and the limited availability of homes for sale has been adding to upward pressure on prices, delaying some purchase activity. While there was a slight increase in the number of homes for sale to just over 1 million units, this was likely due to the declining sales pace as demand slows. At just over a two-month supply, inventory is still extremely low by historical standards, and the recent slowdown in residential construction activity may prolong this shortage.”
