The housing market in April experienced a setback with a 1.9% decline in sales of previously owned homes compared to March, totaling 4.14 million units on a seasonally adjusted annualized basis. This unexpected drop was contrary to the forecasted slight gain for the month. Additionally, these sales were 1.9% lower than the same period last year, indicating a challenging landscape for homebuyers and sellers alike.
Mortgage rates played a significant role in the decline, with rates jumping at the beginning of February and maintaining around 7% for the following two months before escalating further in April. Lawrence Yun, chief economist for the National Association of Realtors, highlighted the impact of skyrocketing mortgage rates, citing a 300 basis point increase from pre-Covid levels. This surge in rates has created uncertainty in the market, affecting the lock-in effect and potentially limiting home sales.
Housing Inventory and Pricing
Despite a 9% increase in total housing inventory from the previous month and a 16% rise from the previous year, housing supply remains constrained, with only a 3.5-month supply at the current sales pace. A balanced market typically features a six-month supply to cater to both buyers and sellers. Notably, the supply of homes priced over $1 million saw a substantial 34% uptick year over year, driving heightened activity in that sector.
Sales of homes priced below $100,000 experienced a 7.1% decline compared to the previous year, while sales of properties exceeding $1 million surged by 40%. This disparity in sales performance can be attributed to the competitive market conditions and limited supply, applying pressure on prices. The median price of existing homes sold in April reached $407,600, marking a 5.7% increase year over year and setting a new record high for the month.
The housing market in April witnessed first-time buyers constituting 33% of total sales, showing a slight improvement from the previous year’s figure of 29%. Additionally, cash transactions remained prevalent, representing 28% of all transactions, indicating the presence of seasoned investors.
Regionally, sales in the Northeast experienced a 4% decline from both March and April 2023, with a median price of $458,500, reflecting an 8.5% year-over-year increase. In the Midwest, sales dropped 1% both monthly and annually, with a median price of $303,600, up by 6% from the previous year. The South saw a 1.6% decrease in sales from March and a 3.1% dip from the previous year, with a median price of $366,200, showing a 3.7% year-over-year increase. Finally, the West reported a 2.6% decrease in monthly sales but a 1.3% rise from the previous year, with a median price of $629,600, up by 9.3% from April 2023.
The housing market in April faced challenges with a decline in sales, driven by rising mortgage rates and limited inventory. While certain segments, particularly homes priced above $1 million, saw heightened activity, affordability concerns persisted for lower-priced properties. As the market continues to evolve, stakeholders must navigate these dynamic conditions to foster a balanced and sustainable real estate environment.