Temporary rebound proves fleeting amid high financing costs
After an unexpected jump in February, existing home sales in the US fell back to disappointing levels in March, according to the National Association of Realtors (NAR).
Existing-home sales slipped 4.3% from the prior month to a seasonally adjusted annual rate of 4.19 million units. On a year-over-year basis, sales declined 3.7% compared to last year’s 4.35 million rate.
“Though rebounding from cyclical lows, home sales are stuck because interest rates have not made any major moves,” NAR chief economist Lawrence Yun said in the report. “There are nearly six million more jobs now compared to pre-COVID highs, which suggests more aspiring home buyers exist in the market.”
Selma Hepp, chief economist of CoreLogic, commented: “Existing home sales are settling back into a more even trend after February’s unexpected jump. In March, high mortgage rates continued to govern homebuyer demand, resulting in a weaker-than-anticipated seasonal pickup. Nevertheless, thawing out of the existing for-sale supply will likely breathe some life into the housing market. Still, homebuyers are contending with the elevated cost of homeownership not only due to higher mortgage rates and home prices but also increased cost of homeowners’ insurance and property taxes.”
The supply of homes for sale did increase, with total housing inventory rising 4.7% from February to 1.11 million units, up 14.4% from a year ago.
A&D Mortgage CEO Max Slyusarchuk said the return to subdued sales was not unexpected given the challenging environment.
“The supply of these homes is finite, ultimately, and with rates historically high for the near term, we don’t expect to see many more positive numbers in this particular housing sector anytime soon,” Slyusarchuk said. “We expect new home sales to perform much better in the coming months, by comparison.”
“More inventory is always welcomed in the current environment,” Yun added. “Frankly, it’s a great time to list with ongoing multiple offers on mid-priced properties and, overall, home prices continuing to rise.”
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Despite the sales pullback, home prices continued to rise, with the median existing home price reaching $393,500 in March, an increase of 4.8% from a year earlier.
“Home prices went up in March, even as fewer people bought homes and the inventory of unsold properties grew,” said NerdWallet mortgage expert Holden Lewis. “This is an unusual combination because normally, you would expect prices to decline when supply rises and demand falls. But demand isn’t really falling. Plenty of people want to buy homes, but high mortgage rates are forcing some of them to the sidelines. The remaining buyers have enough money to afford a home, and they are competing for the limited supply of homes and bidding prices upward.”
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