Sales of previously occupied U.S. homes slowed for the third straight month in April as mortgage rates jumped, pushing up borrowing costs for potential buyers as home prices hit new highs.
Sales of existing homes fell 2.4% last month from March to a seasonally adjusted annual rate of 5.61 million, the National Association of Realtors said Thursday.
That was slightly higher than economists expected, according to FactSet. Sales fell 5.9% from April last year. After hitting an annual rate of 6.49 million in January, sales fell at the slowest rate since June 2020, near the start of the pandemic, when they ran at an annualized rate of 4.77 million homes. .
The median home price in April jumped 14.8% from a year ago at the same time to $391,200. That’s an all-time high based on data dating back to 1999, NAR said.
“Without a doubt, rising mortgage rates, rising prices are hurting affordability, but we shouldn’t ignore that we are still short of inventory,” said Lawrence Yun, chief economist of NAR.
Fierce competition for limited properties in the market and ultra-low mortgage rates have overheated the housing market over the past two years, but now it is cooling as homebuyers face steep home financing costs. higher than a year ago following a rapid rise in mortgage rates.
In April, the weekly average rate on a 30-year fixed-rate mortgage rose above 5% for the first time in more than a decade, putting a strain on the purchasing power of future homeowners at the start of the spring home ownership season, traditionally the busiest time for home sales.
Mortgage buyer Freddie Mac reported on Thursday that the 30-year rate had slipped to 5.25% this week from 5.3% last week. A year ago, the average rate was 3%.
Mortgage rates climb on the back of a sharp rise in 10-year Treasury yields, reflecting expectations of an overall interest rate hike as the Federal Reserve raises short-term rates to combat the worst inflation in 40 years.
With inflation at its highest level in four decades, rising mortgage rates, rising house prices and a tight supply of homes for sale, home ownership has become less accessible, especially for first buyers.
Higher rates can limit the pool of buyers and slow the rate of home price growth – good news for buyers. But higher rates can also limit affordability.
For now, the housing market continues to favor sellers as buyers compete for a still-tight inventory of homes for sale, which has continued to push home prices higher. Even though sales slowed last month, it was common for homes on the market to receive multiple offers.
Inventory levels need to rise before more offers dissipate from the market, Yun said. Until then, prices are expected to rise.
“We expect, again, a continued decline in home sales, but not necessarily home prices,” he said.
On average, homes sold in just 17 days after going on the market last month, unchanged from March or April of last year. In a more balanced market between buyers and sellers, homes generally remain on the market for 45 days.
As usual in the spring, the number of homes on the market increased in April compared to the previous month. Some 1.03 million properties were available for sale at the end of April, up 10.8% from March but down 10.4% from April last year.
At the current pace of sales, the level of properties for sale stands at 2.2 months supply, the NAR said. That’s up from 1.9 months in March and down from 2.3 months a year ago.
Real estate investors and other buyers able to buy a home with just cash, avoiding the need to rely on financing, accounted for 26% of all sales last month, down from 28% in March, said NAR.
Homes bought by investors accounted for 17% of sales in April, compared to 18% the previous month, while first-time buyers accounted for 28% of transactions, compared to 30% in March and 31% a year ago.