Rising Prices, Interest Rates Cool US Home Sales In April
Rising prices and higher mortgage rates slowed US existing home sales for the third consecutive month in April, according to an industry survey released Thursday.
Sales fell 2.4 percent compared to March to an annual rate of 5.61 million, seasonally adjusted, which was 5.9 percent lower than April 2021, the National Association of Realtors (NAR) reported.
"Higher home prices and sharply higher mortgage rates have reduced buyer activity," NAR Chief Economist Lawrence Yun said. "It looks like more declines are imminent in the upcoming months, and we'll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years."
Bargain borrowing rates helped fuel the strong demand for home buying during the pandemic, which has driven prices ever higher while builders have struggled to keep up due to supply backlogs for lumber and other materials amid a shortage of workers.
But the Federal Reserve has embarked on an aggressive campaign to tamp down inflation pressures by raising interest rates, which has sent mortgage costs sharply higher.
The average rate on a 30-year, fixed-rate mortgage was 4.98 percent in April, up from 4.17 percent in March, and far above the 2021 average of 2.96 percent, according to Freddie Mac.
The median existing-home price for all housing types jumped to $391,200, up 14.8 percent from April 2021, according to NAR. Prices have risen for 122 consecutive months of year-over-year increases, the longest-running streak on record.
Slowing sales in recent months have allowed the inventory of unsold homes to recover -- at what Yun called a "sluggish pace" -- and was back to a 2.2-month supply, nearly where it was a year ago.
Single family home sales fell 2.5 percent last month, while sales of condos fell 1.6 percent, according to the survey.
Yun noted that despite rising prices, homes still do not stay on the market long, selling in an average of 17 days, and the report showed all-cash buyers accounted for more than a quarter of the sales in the month.
Nancy Vanden Houten of Oxford Economics said strong demand is likely to remain a feature of the housing market but "we expect existing home sales to lose more momentum as a sharp erosion in homebuying affordability weighs on sales."
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