Sales of existing homes continue to fall as rising mortgage rates present buyers with affordability issues.
The National Association of Realtors (NAR) reports that home sales fell 2.4% from March to April. Compared to April 2021, sales were off by 5.9%.
In previous months, sales declines were often the result of fewer available homes for sale. But in April, sales fell against a backdrop of rising interest rates that increased the average monthly mortgage payment.
"Higher home prices and sharply higher mortgage rates have reduced buyer activity," said Lawrence Yun, the NAR's chief economist. "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."
Prices are still high
Fewer sales did not translate into lower prices. The NAR reports that the median existing home price for all housing types in April was $391,200, an increase of 14.8% from April 2021. Those numbers mark 122 consecutive months of year-over-year price increases.
Some economists believe a drop in demand for homes will eventually provide a break for buyers. But with a very tight housing inventory, Michael Gifford, CEO & co-founder of Splitero, isn’t sure when that might happen.
“The reality is that there is significant pent-up demand in all markets, with supply slowly trickling out,” Gifford recently told ConsumerAffairs. “The question is about seller motivation when it comes to dropping their price. Selling motivation is low in this market for most sellers as their next home is challenging to locate whether they are trying to buy or rent.”
Mortgage rates are a headwind for buyers
Even if prices were to moderate in the months ahead, mortgage rates will likely remain a headwind for buyers. The average 30-year, fixed-rate mortgage dropped slightly this week to 5.25%, according to Freddie Mac. A year ago, buyers were locking in a 3% mortgage rate.
With declining sales, the number of homes on the market rose nearly 11% last month, giving buyers more choices and reducing the likelihood of bidding wars. But home shoppers still have to move quickly.
NAR data shows that properties remained on the market for an average of 17 days in April before going under contract. Eighty-eight percent of homes sold in April 2022, were on the market for less than a month.