Existing home sales fell in March, as higher interest rates continued to put pressure on borrowers, but some analysts believe that the housing market slump is nearing an end.
Rising mortgage rates last month were a likely factor in deterring buyers by adding downward pressure on housing values, as fewer borrowers can afford higher payments.
Home sales fell 2.4 percent, to a seasonally adjusted annual rate of 4.44 million units last month, the National Association of Realtors (NAR) reported on April 18, after a 13.75 percent boost in the previous month.
Economists polled by Reuters had projected home sales falling to a rate of 4.50 million units.
This was the first rise in housing sales in a year; but after mortgage rates rose in March, the market returned to negative territory.
Existing home sales are counted at the closing of a contract, with the March sales boom likely reflecting agreements signed in February when mortgage rates started to rise after declining in January.
Meanwhile, home resales, which account for a major proportion of housing sales, slid 22 percent on a year-over-year basis last month.
Mortgage Rates Soften, as Fed Is Expected to Ease Policy Hikes
The Federal Reserve’s strategy to aggressively raise interest rates to combat high inflation has caused a collapse of the housing market.“Consumers appear to be very sensitive to changes in mortgage rates,” said Yun, adding that “the week-to-week changes in mortgage rates are having a big impact.”
Mortgage rates have been declining over the past four weeks, in conjunction with Treasury yields, based on the expectation that the Fed will halt its campaign to raise interest rates past May amid signs of an economic slowdown.
The average rate for a 30-year fixed mortgage hit 6.39 percent this week, up from 5.11 percent a year earlier, according to Freddie Mac.
A softening in central bank interest-rate policy may encourage some buyers to reenter the market, but the recent banking crisis is likely to result in fewer home loans due to tightening underwriting standards.
The median existing house price fell 0.9 percent from a year earlier, to $375,700 in March, for the largest decline since January 2012.
First-time buyers accounted for 28 percent of sales, down from 30 percent a year ago. Cash-only sales made up 27 percent of transactions compared to 28 percent in 2022, while distressed sales, including foreclosures, which only made up 1 percent of transactions, remained the same.
Home sales fell in the West, Midwest, and in the South, but remained stable in the Northeast.
“Home prices continue to rise in regions where jobs are being added and housing is relatively affordable,” Mr. Yun said.
Home Construction Increases Supply, Easing Shortages
Investment in housing contracted for seven straight quarters by the end of March, for the longest streak of declines since the collapse of the housing bubble over a decade ago.Housing starts fell 0.8 percent in March from February, while residential permits—a bellwether for future home construction—dropped 8.8 percent, reported the Department of Commerce this week.
However, single-family homebuilding still rose for a second straight month last month while permits for future construction surged.
A housing supply of four to seven months is viewed as an optimum balance between supply and demand.
There were 980,000 previously owned homes on the market, up 5.4 percent from a year ago, which would take 2.6 months to exhaust, up from two months a year ago, taking into account the current sales pace.
Properties typically remained on the market for 29 days in March, down from 34 days in February, according to the report. Sixty-five percent of homes sold last month were on the market for less than 30 days.
