In March, sales of previously owned homes dropped 4.3% compared with February, reaching a seasonally adjusted annualized rate of 4.19 million units. This was also 3.7% lower than the sales figures in March 2023. The decline in sales is attributed to rising mortgage rates, which likely slowed down the housing market. Mortgage rates had increased significantly in February following a period of stability in January when they were in the mid 6% range for the 30-year fixed loan. Sales dropped in all regions except for the Northeast, where they rose by 4.2%. The West saw the largest decline in sales, down 8.2%.
According to Lawrence Yun, the chief economist of the National Association of Realtors (NAR), the increase in home sales has been limited by the lack of significant movement in interest rates. Although there are more job opportunities available, with nearly six million more jobs compared to pre-COVID levels, there is still a stagnant trend in the housing market. Inventory levels showed a slight improvement in March, with a 4.7% increase month-over-month, resulting in 1.11 million homes available for sale, representing a 3.2-month supply at the current sales pace. This marks a 14.4% increase from the same period last year.
Despite the increase in inventory, home prices continued to climb in March, with the median price of an existing home reaching $393,500, up by 4.8% from the previous year. This is the highest price ever recorded for the month of March. The spring housing market has become more competitive, with homes selling faster than before. The average number of days a home stayed on the market decreased to 33 days, down from 38 days in February. Investors pulled back slightly in March, representing 15% of total sales compared to 21% in February, while first-time buyers made a comeback, accounting for 32% of sales, up from 26% in February.
Despite the slight decrease in all-cash purchases in March, which accounted for 28% of sales compared to 33% in February, this figure remains higher than last year’s percentage of 27%. Before the pandemic, all-cash purchases typically made up around 20% of sales. Mortgage rates have continued to rise, with the average rate on the 30-year fixed mortgage hovering around 7.5%, according to Mortgage News Daily. Yun notes that reaching these higher, round numbers can act as psychological barriers for potential buyers and further impact the housing market. The increasing mortgage rates may continue to pose challenges for both buyers and sellers in the coming months.
