Sales of previously owned homes in the United States fell by 4.3% in March, marking the sharpest drop in over a year. Home prices continued to climb, with the median price of an existing home reaching $393,500, the highest on record for March. Rising prices, coupled with steady mortgage rates, have created challenges for potential homebuyers, impacting the crucial spring homebuying season. While overall home sales have improved since last fall, they may not see significant growth as the Federal Reserve indicates it will not be cutting interest rates in the near future.
The National Association of Realtors reported that existing home sales fell across the country in March, except for the Northeast region, which saw an increase for the first time since November. NAR chief economist Lawrence Yun noted that while there are more jobs compared to pre-Covid levels, home sales remain stagnant due to the lack of major movements in interest rates. Mortgage rates play a vital role in determining housing affordability, and with rates steady and home prices on the rise, many Americans are finding it difficult to enter the housing market.
Last year, home sales hit a decades-long low as mortgage rates skyrocketed to a two-decade high of 7.79% in October. However, as hopes of aggressive rate cuts were dashed, mortgage rates began to decline. Despite this, mortgage rates have remained steady in recent weeks and are likely to rise as they track bond yields, which are increasing due to high inflation readings. Coupled with consistently high home prices, the affordability of housing continues to be a pressing issue for many potential buyers.
One positive note in the latest NAR report on existing home sales was an increase in first-time homebuyers entering the market. They represented 32% of all transactions in March, up from 26% in February and 28% higher than a year ago. This increase may be attributed to the anticipation of changes to how homebuyers and sellers pay their real estate agents, following a historic NAR settlement announced in March. Despite not yet being approved by the courts, the settlement has prompted some buyers to act quickly before the new rules take effect, possibly in July.
The real estate industry has been disrupted by the anticipation of changes brought about by the NAR settlement, with some buyers eager to secure their purchases before the new rules come into play. This sense of urgency may have contributed to the increase in first-time homebuyers in March. Still, the overall housing market remains challenging for many Americans, with affordability concerns persisting due to high home prices and steady mortgage rates. The spring homebuying season continues to be impacted by these factors, as potential buyers navigate the complexities of the current housing market.
