Sales of existing homes fell by 2.4% in March, reversing some of February’s strong rise, while prices also fell, suggesting that higher mortgage rates and a slowing economy are affecting the housing market as it enters the critical spring selling season.
The National Association of Realtors said in its monthly report released on Thursday that sales declined in all geographic regions except in the Northeast where they held steady. Overall, sales are down 22% from a year ago to a yearly rate of 4.44 million.
The median price fell by 0.9% from a year ago to $375,700, mainly because of a drop in the West.
“Home sales are trying to recover and are highly sensitive to changes in mortgage rates,” association Chief Economist Lawrence Yun said. “Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand. It’s a unique housing market.”
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While buyers exist for homes, a shortage of available inventory and mortgage rates that have doubled over the past year are making it more difficult for many potential buyers. Owners of existing homes, meanwhile, are unwilling to sell houses that have mortgages of 3% or less.
“Sales of existing homes slipped in March as the battle between affordability and aspirations continues,” said Danielle Hale, Realtor.com chief economist. “Mortgage rates climbed in February, when many of the homes sold in March would have gone under contract.”
“The home sales pace lagged the March 2022 pace significantly,” she added. “However, despite slowing for the month, the pace of home sales remains convincingly above the recent 4 million sales low reached in January, just 2 months after mortgage rates registered above 7%.”
Meanwhile, the Conference Board’s leading economic index fell by 1.2% in March and is now down 4.5% over the past months. It is now at its lowest level since November, 2020.
“The U.S. LEI fell to its lowest level since November of 2020, consistent with worsening economic conditions ahead,” said Justyna Zabinska-La Monica, senior manager, business cycle indicators, at the business organization. “The weaknesses among the index’s components were widespread in March and have been so over the past six months, which pushed the growth rate of the LEI deeper into negative territory.
“Only stock prices and manufacturers’ new orders for consumer goods and materials contributed positively over the last six months,” Zabinska-La Monica added. “The Conference Board forecasts that economic weakness will intensify and spread more widely throughout the US economy over the coming months, leading to a recession starting in mid-2023.”