- Existing home sales fell 2.4% last month from March.
- The median home price in April rose 14.8% from this time last year to $391,200.
- Homeownership is becoming less and less accessible, especially for first-time buyers.
Sales of previously occupied US homes slowed for the third straight month in April as mortgage rates rose and pushed up borrowing costs for potential buyers as home prices soared to new highs.
Existing home sales last month fell 2.4% from March to a seasonally adjusted annualized rate of 5.61 million National Association of Real Estate Agents said Thursday.
That was slightly higher than economists expected, according to FactSet. Sales fell 5.9% from April last year. After sales rose to an annual rate of 6.49 million in January, sales have fallen to the slowest pace since June 2020, just before the pandemic began, when they were running at an annual rate of 4.77 million homes.
The median home price in April was up 14.8% year over year at the time to $391,200. According to NAR, that’s an all-time high based on 1999 data.
“Without a doubt, rising mortgage rates and rising prices are hurting affordability, but we shouldn’t overlook the fact that we’re still short of inventories,” said Lawrence Yun, NAR’s chief economist.
Hot housing market is slowly cooling down
Fierce competition for limited properties in the market and extremely low mortgage rates have overheated the housing market in recent years, but it is now cooling as homebuyers face significantly higher financing costs than a year ago following a rapid rise in mortgage rates.
In April, the average weekly interest rate on a 30-year fixed-rate home loan climbed above 5% for the first time in more than a decade, sapping the spending power of potential homeowners as the spring homebuying season begins, traditionally the busiest time for home sales.
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Mortgage buyer Freddie Mac reported Thursday that the 30-year bond rate fell to 5.25% this week from 5.3% the previous week. A year ago the average rate was 3%.
Mortgage rates rise after a sharp rise in 10-year Treasury yields, reflecting expectations of higher rates overall as the Federal Reserve hikes short-term rates to combat the worst inflation in 40 years.
With inflation at a four-decade high, rising mortgage rates, soaring home prices and a tight supply of homes for sale, homeownership is becoming less and less achievable. especially for first time buyers.
Higher interest rates may restrict the buyer base and reduce the rate of home price growth – good news for buyers. But higher rates can also limit affordability.
Potential home buyers still struggle with a seller’s market
For now, The housing market continues to favor sellers as buyers vie for a still-scarce inventory of homes for sale, which pushed home prices further up. Even as sales slowed last month, it was common for homes in the market to receive multiple offers.
Inventory levels must rise before several offerings disappear from the market, Yun said. Until then, prices are likely to rise.
“We again expect a continued decline in home sales, but not necessarily in home prices,” he said.
On average, homes were sold in just 17 days after their launch last month, unchanged from March or April last year. In a market that is more balanced between buyers and sellers, homes typically stay on the market for 45 days.
As is usual in spring, the number of homes on the market rose in April compared to the previous month. By the end of April, around 1.03 million homes were for sale, up 10.8% from March but down 10.4% from April last year.
At the current pace of sales, the level of properties for sale is 2.2 months supply, the NAR said. That’s up from 1.9 months in March and down from 2.3 months a year ago.
Real estate investors and other buyers can only buy a home with cashbypassing the need to rely on financing accounted for 26% of all sales last month, up from 28% in March, NAR said.
Investor-bought homes made up 17% of sales in April, up from 18% the previous month, while first-time buyers made up 28% of transactions, up from 30% in March and 31% a year ago.