March Existing Home Sales Show Signs of Weakness
As the spring housing market begins, recent trends reveal a considerable decline in existing home sales. Data from the National Association of Realtors (NAR) indicates that sales plummeted by 5.9% in March compared to February, settling at an annualized pace of 4.02 million units — the slowest for this month since 2009.
Sales Performance by Region
Year-over-year comparisons also paint a troubling picture, with March sales showing a decrease of 2.4% from the previous year. The decline was consistent across all regions, with the West experiencing the steepest drop of over 9%. However, it should be noted that the Rocky Mountain area within the West reported strong job growth, leading to a slight uptick in activity there.
Impact of Mortgage Rates
This downturn can be attributed to various factors, notably high mortgage rates. In January and February, the average rate on a 30-year fixed mortgage exceeded 7%, constraining buyer activity as potential homeowners grapple with affordability challenges. Lawrence Yun, NAR’s chief economist, remarked, “Home buying and selling remained sluggish in March due to the affordability challenges associated with high mortgage rates.”
Inventory Levels
Interestingly, despite falling sales, the availability of homes on the market increased significantly. By the end of March, listings reached 1.33 million units, marking a nearly 20% rise from March of the previous year. At the current sales pace, this inventory corresponds to a four-month supply, which, while leaning toward a seller’s market, is still below the balanced six-month supply threshold.
Price Trends and Buyer Dynamics
As inventory rises and sales slow, there are early indications of price stabilization in the housing market. The median price for an existing home in March was recorded at $403,700, still a record high for that month, but it showed a modest increase of just 2.7% from March 2024 — the smallest annual gain since last August. Yun noted the gains in residential real estate are significant, stating, “With real estate asset valuation at $52 trillion, according to the Federal Reserve Flow of Funds, each percentage point gain in home prices adds more than $500 billion to the household balance sheet.”
First-time home buyers constituted 32% of the market, similar to the previous year but lower than the historical average of about 40%. Concurrently, all-cash purchases fell slightly to 26%, while investor participation remained stable at 15% of total sales.
Outlook for the Future
Looking ahead, the NAR has reported an uptick in canceled contracts for March, raising concerns about potential further declines in the upcoming months, especially in light of economic uncertainties and stock market volatility. Economist Robert Frick of Navy Federal Credit Union expressed caution, mentioning that “March numbers are bad, but they’re likely to get worse.” He highlighted that inflation and job market anxieties might exacerbate homebuyer hesitance.
The combination of elevated prices, high mortgage rates, and rising costs for home furnishings could lead to a continued chilling effect on the housing market as families adjust their buying strategies amid economic concerns.