In March, sales of previously-owned homes dropped by 4.3% compared to February, with a seasonally adjusted annualized rate of 4.19 million units, marking a 3.7% decrease from the same time last year. This decline is believed to be a result of rising mortgage rates. The increase in sales in February was likely due to lower mortgage rates in January, which rose significantly in February. Despite an uptick in inventory, the median home price continued to rise, reaching a record high of $393,500 in March, a 4.8% increase from the previous year. The market remained competitive, with homes selling faster than in the previous month.
Regionally, home sales declined in every area except for the Northeast, where they saw a 4.2% increase. The West experienced the largest drop in sales, down 8.2%. Lawrence Yun, NAR’s chief economist, stated that interest rates have remained relatively stagnant, contributing to the stagnation in home sales despite an increase in job opportunities following the pandemic. Inventory improved slightly in March, rising by 4.7% compared to the previous month, with a 3.2-month supply at the current sales pace. Inventory levels were also up by 14.4% from the previous year.
Investors made up 15% of home sales in March, down from 21% in February, while first-time buyers comprised 32% of sales, up from 26% the previous month. All-cash purchases accounted for 28% of sales, a slight decrease from 33% in February. Yun noted that mortgage rates continued to rise, reaching around 7.5% for the 30-year fixed-rate loan. This increase could be a significant barrier for prospective homebuyers, as higher rates may deter individuals from entering the housing market.
Despite the slowdown in sales and rising mortgage rates, Yun remains optimistic about the housing market, pointing to the increased number of job opportunities compared to pre-pandemic levels. However, the stagnant interest rates are keeping potential buyers out of the market. The continued rise in home prices, coupled with the limited inventory, poses a challenge for buyers seeking affordable housing options. As the spring housing market becomes increasingly competitive, aspiring homeowners may face greater challenges in finding and securing a home that meets their needs and budgets.
As the housing market continues to face challenges related to rising mortgage rates and limited inventory, prospective buyers are urged to act quickly to secure a home before prices rise further. With homes selling faster and at higher prices, buyers may need to be prepared to make competitive offers and navigate a rapidly changing market. Despite these challenges, Lawrence Yun remains hopeful that the market will rebound as more buyers enter the market and inventory levels stabilize.
