By Aarthi Swaminathan
The numbers: Existing-home sales in the U.S. fell 2.4% in March, as buyers contended with higher mortgage rates and a lack of new listings.
Sales of previously owned homes in the U.S. fell to an annual rate of 4.44 million in March, the National Association of Realtors said Thursday.
That’s the number of homes that would be sold over an entire year if sales took place at the same rate in every month as they did in March. The numbers are seasonally adjusted.
The drop in sales reverses a sudden jump in February, when home sales rose to a revised pace of 4.55 million.
The drop in sales was larger than expected. Economists had expected existing-home sales to total 4.48 million in March.
Compared with March 2022, home sales were down 22%.
Key details: The median price for an existing home fell by 0.9% from last March, dropping to $375,700 this year.
The drop is the largest since January 2012, when home prices fell 2% year over year. It’s also the second month in a row that home prices fell.
Home prices peaked at 25.2% in May 2021.
The number of homes on the market rose by 1% in March from the previous month, to 980,000 units.
Expressed in terms of the months-supply metric, there was a 2.6-month supply of homes for sale in March, the same as the previous month. Before the pandemic, a four- or five-month supply was the norm.
Homes remained on the market for 29 days on average in March, down from 34 days in February.
Sales of existing homes fell in most regions, falling the most in the Midwest. The Northeast was the only region that saw sales remain flat.
All-cash transactions made up 27% of all sales, and about 28% of homes were sold to first-time home buyers. The share of individual investors or second-home buyers was 17%.
Big picture: Buyers are watching mortgage rates, and with a low number of homes on the market, they’re being cautious and pulling back when the market isn’t going their way.
Rates rose in the latest week, adding hundreds of dollars in extra costs for potential borrowers, and mortgage demand is down. The drop likely signals further weakness in home sales.
Would-be home buyers are also contending with a low supply of new listings. Many are turning to new homes, whose inventory continues to grow. Builders are gaining market share as a result.
What the realtors said: “It’s a unique housing market,” Lawrence Yun, chief economist at the National Association of Realtors, said.
Despite drops in home prices and sales, multiple offers are back, Yun said, especially for entry-level homes. New listings are down 17% from the previous year.
So it’s unclear if the market is hot or cold, he said.
What are they saying? “There are reasons to remain pessimistic about the outlook for the housing sector,” Thomas Simons, U.S. economist at Jefferies, wrote in a note. “Affordability is still challenging between both prices and borrowing rates, credit standards continue to tighten, and supply on the market remains very low.”
Stock market reaction: Stocks were up in early trading on Thursday. The yield on the 10-year note rose above 3.5%.