Potential buyers attend an open house of homes for sale in Larchmont, New York, USA on Sunday, January 22, 2023.
Tiffany Hagler-Gilder | Bloomberg | Getty Images
According to the National Association of Realtors, sales of previously owned homes fell 4.3% in March from February to a seasonally adjusted annualized sales volume of 4.19 million units. Sales were down 3.7% from March 2023.
Rising mortgage rates may be to blame for the economic slowdown.
The sales figures are based on closings on contracts likely to be signed in January and February. Mortgage rates remained low in January, at around 6% for a popular 30-year fixed loan. Then they spiked in February.
From a regional perspective, except for the Northeast region, where sales increased by 4.2% compared with the previous quarter, sales in other regions declined. Sales in the Western region fell the most, down 8.2%. Prices are highest in the western region.
“Despite rebounding from cyclical lows, home sales have remained stagnant without any significant movement in interest rates,” NAR Chief Economist Lawrence Yun said in a release. There are nearly 6 million more jobs than at pre-pandemic highs, indicating there are more aspiring homebuyers in the market.”
Inventory did improve slightly, with homes for sale at the end of March rising 4.7% month-on-month to 1.11 million units. At current sales rates, this equates to a 3.2-month supply. The current inventory is 14.4% higher than last March.
However, more supply has not lowered house prices. The median price of an existing home sold in March was $393,500, up 4.8% from a year earlier. This is also the highest price since March. However, the year-over-year comparison was slightly lower than the previous month.
The spring housing market is becoming more and more competitive and developing faster and faster. The typical home is on the market for just 33 days, compared with 38 days in February.
Investors pulled back slightly, accounting for 15% of sales, compared with 21% in February last year and 17% in March. However, first-time homebuyers did make a comeback, accounting for 32% of sales, up from 26% in February and 28% the year before.
All-cash purchases accounted for 28% of sales, down from 33% in February but up from 27% a year ago. Before the pandemic, this ratio was generally about 20%.
Mortgage rates are even higher this month, with the average 30-year fixed rate hovering around 7.5%, according to Mortgage News Daily.
“Every time you hit that number, you always run into a psychological barrier,” Yun said.
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