Photo: CTV News
Sales of previously occupied US homes slowed for the third consecutive month in April as mortgage rates rose, driving up borrowing costs for potential buyers as home prices soared to new highs.
The National Association of Realtors said Thursday that existing home sales fell 2.4% last month from March to a seasonally adjusted annual rate of 5.61 million.
That was slightly higher than economists had expected, according to FactSet. Sales were down 5.9% compared to April of last year. After climbing to an annual rate of 6.49 million in January, sales fell to the slowest pace since June 2020, when they were operating at an annual rate of 4.77 million homes.
The median home price in April jumped 14.8% from a year ago at this time to $391,200. This is an all-time high, NAR said, according to data going back to 1999.
“Without a doubt, higher mortgage rates, higher prices are hurting affordability, but we shouldn’t rule out that we are still short on inventory,” said Lawrence Yun, NAR’s chief economist.
Fierce competition for limited real estate in the market and ultra-low mortgage rates have heated up the housing market in the past couple of years, but now the situation has subsided as home buyers face sharply higher mortgage costs compared to last year after a rapid rise in mortgage rates.
In April, the average weekly price of a 30-year fixed rate home loan rose above 5% for the first time in more than a decade, slashing the purchasing power of potential homeowners at the start of the spring home buying season, typical of the busiest period for home sales. .
Mortgage rates are rising after a sharp rise in 10-year Treasury yields, reflecting expectations of higher interest rates overall as the Federal Reserve raises short-term rates in order to combat the worst inflation in 40 years.
With inflation at a four-decade high, mortgage rates rising, home prices soaring and the supply of homes for sale in short supply, home ownership is becoming less and less achievable, especially for first-time buyers.
Higher rates can reduce the pool of buyers and dampen the rate of home price growth – good news for buyers. But higher rates can also limit affordability.
Currently, the housing market continues to favor sellers as buyers compete for a tight stock of homes for sale, which has continued to drive up home prices. Even as sales slowed last month, it was common for homes on the market to receive multiple offers.
Yoon said inventory levels must rise before multiple offers from the market dissipate. Until then, prices are likely to go up.
“We expect, once again, a continued decline in home sales, but not necessarily home prices,” he said.
On average, homes were sold within just 17 days of entering the market last month, unchanged from March or April of last year. In a more balanced market between buyers and sellers, homes usually stay on the market 45 days.
As usual in spring, the number of homes on the market increased in April from the previous month. There were about 1.03 million properties on sale at the end of April, up 10.8% from March, but down 10.4% from April last year.
At the current sales pace, the properties for sale have a 2.2 month supply, NAR reported. That’s up from 1.9 months in March, and down from 2.3 months a year ago.
Real estate investors and other buyers who are able to purchase a home with cash only, and avoid the need to rely on financing, made up 26% of total sales last month, down from 28% in March, the agency said.
Homes bought by investors accounted for 17% of sales in April, down from 18% the previous month, while first-time buyers accounted for 28% of transactions, down from 30% in March and 31% a year earlier.