Existing home sales down for a second month
Home sales surged in February after a year of declines, but the momentum didn't last long. After dropping in March, sales dipped further in April.
- NAR reports there were 4.28 million existing home sales in April, a 3.4% drop from March.
- However, inventory increased by 7.2% month over month, which could give buyers a better shot at finding a home.
- Elevated mortgage rates and tight inventory continue to put a drag on home sales, experts say.
The killer combo of high mortgage rates and an ongoing inventory crunch continues to thwart the residential real estate market as buyers compete for the few homes up for sale.
The situation for existing home sales has gotten tougher for buyers and their agents, falling 3.4% month-over-month in April and by a dramatic 23.3% year-over-year, the National Association of Realtors has reported. This translates to a seasonally adjusted annual rate of 4.28 million transactions completed in April, NAR said.
Inventory edges up, prices remain relatively stable
However, there is some good news for buyers. Inventory for unsold existing homes — roughly 1.04 million homes — improved by the end of April, increasing by 7.2% month-over-month and 1% year-over-year. NAR estimates that this equates to about three months of supply at the current sales pace, up slightly from 2.6 months in March.
So what does it all mean?
"The combination of job gains, limited inventory and fluctuating mortgage rates over the last several months have created an environment of push-pull housing demand," NAR Chief Economist Lawrence Yun said in the release, also noting that despite the ups and downs, existing home sales remain "above recent cyclical lows."
The overall price for homes has also remained stable, at least from a macro perspective. According to the NAR report, the median sale price for all existing home types in April was $388,800, a small decrease from the $395,500 median sale price from the same period a year prior.
Additionally, the type of buyer remains consistent as well. First-time homebuyers represented 29% of existing home purchases in April, only a 1% increase from the same period last year. Cash sales accounted for 28% of April closings, and individual investors, or second home purchasers, represented 17% of April's existing home deals.
No 'major correction,' just a tough market
While economic uncertainty combined with mortgage rates above 6% have pushed a lot of buyers to the sidelines, a major crash is unlikely, said Dr. Lisa Sturtevant, chief economist at Bright MLS.
"Despite a cooler-than-normal spring market, we shouldn't be concerned that the housing market is poised for a major correction," Sturtevant said. "The recent dip in the overall U.S. median home price likely also reflects a change in the mix of homes sold, as rate-sensitive home shoppers shift to different home types and price points as they navigate the housing market this spring."
ING Chief International Economist James Knightley also sees borrowing costs and inventory constraints as major culprits behind the lackluster home sales.
"The more than doubling of mortgage rates over the past 18 months means many homeowners who would like to move are effectively locked in by the cheap financing they secured on their current property," he said in a prepared statement. "New home sales have consequently been performing more strongly despite the drop in mortgage applications for home purchases — the buyers that are out there simply don't have much to choose from."