The National Association of Realtors (NAR) reported last week that total existing home sales dropped 4.4 percent in April to a seasonally adjusted annual rate of 5.19 million, down from 5.43 million in March. This marks the second consecutive monthly decline in existing home sales and was much lower than economists had expected.
The sharp decline in previously owned home sales is largely attributed to rising mortgage rates. According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage hit 4.66 percent in April, up from 4.21 percent in March. This marked the highest level since August 2011. Higher mortgage rates have made it more difficult and costly for prospective buyers to purchase a home.
The NAR also reported that inventory levels declined 4.2 percent from the previous month and were 16.4 percent lower than a year ago. This lack of available homes is making it difficult for buyers to find a suitable property.
Affordability also remains an issue. Despite the higher mortgage rates, home prices continued to rise in April. According to the NAR, median existing home prices were up 10.3 percent from a year ago to a new all-time high of $231,800. This makes it more difficult for buyers to buy in this current market.
The decline in previously owned home sales was felt across all four regions tracked by the NAR. Sales decreased 4.7 percent in the Midwest, 4 percent in the Northeast, 4.2 percent in the South, and 4.8 percent in the West.
The deterioration in existing home sales is concerning for the housing market. Potential buyers are facing multiple headwinds including rising interest rates, low inventory, and increasing home prices. These conditions are making it more expensive and difficult for buyers to purchase a home.
In summary, previously owned home sales have weakened further over the past month due to multiple headwinds, including rising mortgage rates, low inventory, and increasing home prices. According to the National Association of Realtors (NAR), total existing home sales dropped 4.4 percent in April to a seasonally adjusted annual rate of 5.19 million, down from 5.43 million in March. This marked the second consecutive monthly decline in existing home sales and was much lower than economists had initially expected. Rising mortgage rates contributed to this decline, as the average rate for a 30-year fixed-rate mortgage hit 4.66 percent in April, up from 4.21 percent in March. Additionally, inventory levels declined 4.2 percent from the previous month and were 16.4 percent lower than a year ago, which has made it difficult for buyers to find a suitable property. Furthermore, median existing home prices were up 10.3 percent from a year ago to a new all-time high of $231,800, creating affordability issues. The combination of these factors has created an environment where potential buyers are facing stiff competition and a difficult decision making process when it comes to buying a home.
This article was contributed on Jun 26, 2023
