Sales of existing homes declined in April, down a whopping 23.2% from the year before.
The challenges in the housing market reflect the Federal Reserve’s efforts to lower inflation by raising interest rates, which has caused mortgage rates to rise and has put a home purchase out of reach for many people.
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Existing-home sales fell by 3.4% in April to a seasonally adjusted annual rate of 4.28 million, according to a report by the National Association of Realtors released Thursday.
Total housing inventory at the end of March was 1.04 million units, up 7.2% from March and 1% from a year ago.
“Home sales are bouncing back and forth but remain above recent cyclical lows,” said NAR chief economist Lawrence Yun. “The combination of job gains, limited inventory and fluctuating mortgage rates over the last several months have created an environment of push-pull housing demand.”
The median price of an existing home in April was $388,800, a decline of 1.7% from the year before. Additionally, homes typically remained on the market for 22 days in April, down from 29 days in March but up from 17 days in April 2022.
“The housing market is stabilizing, but at a very low level. Sales of existing homes are well below their long-run average, as low affordability and limited supplies deter potential buyers,” said PNC chief economist Gus Faucher. “The housing market will remain moribund until mortgage rates start to fall later this year. Prices will continue to fall through the rest of this year and into 2024 as an expected national recession takes hold.”
February’s report drew attention because it showed existing home prices fell on an annual basis after 11 straight years of increases.
The rate on the average 30-year fixed-rate mortgage soared from just over 3% at the start of 2022 to over 7% in November. It is registering at 6.35% as of last week, according to Freddie Mac.
The news about existing home sales comes a day after the Census Bureau announced that housing starts, which measure the change in the number of new residential buildings that began construction, tumbled in April.
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Starts fell 22.3% from April 2022 to this past month, according to a Wednesday report. Starts are now running at a 1.4 million annual rate, adjusted for seasonal variation. On a month-to-month basis, though, starts increased 2.2% in April.
The Fed announced earlier this month that it was raising its interest rate target by a quarter of a percentage point. The central bank’s key overnight rate is 5% to 5.25%. Most investors expect the Fed to pause in June, although a growing number are starting to predict yet another hike.
