Sales of previously owned homes declined by 1.9% in April compared to March, resulting in an annualized rate of 4.14 million units, according to data from the National Association of Realtors (NAR). This decline contradicted forecasts that had anticipated a slight increase in sales. On a year-over-year basis, sales were also down 1.9% from April 2023.

Factors Influencing Sales Decline

These sales figures are based on closing transactions, which likely reflect contracts signed in February and March. During this period, mortgage rates experienced a significant increase, starting at the beginning of February and remaining around 7% for the next two months before climbing even higher in April. This spike in mortgage rates significantly impacted home buying decisions.

Lawrence Yun, the chief economist for the National Association of Realtors, highlighted the impact of higher mortgage rates on the market. “When we see these mortgage rates, which is a 300 basis point increase from pre-Covid pace, we are in new territory as to how the lock-in effect will restrain home sales,” said Yun.

Housing Inventory and Price Trends

Total housing inventory at the end of April stood at 1.21 million units, marking a 9% increase from the previous month and a 16% increase from the previous year. Despite this rise, the inventory still represented just a 3.5-month supply at the current sales pace, far below the six-month supply considered balanced between buyers and sellers.

The supply of homes priced over $1 million saw a significant 34% increase year-over-year, which has made this segment the most active in the market. Conversely, sales of homes priced below $100,000 fell by 7.1% year-over-year, while sales of homes priced over $1 million surged by 40%.

Home Prices and Demand Dynamics

The tight supply of homes continued to exert pressure on prices. The median price of an existing home sold in April reached $407,600, a 5.7% increase year-over-year and a record high for April. Strong demand led to multiple offers on properties, with 27% of homes selling above the list price.

“Home prices reaching a record high for the month of April is very good news for homeowners,” Yun commented. “However, the pace of price increases should taper off since more housing inventory is becoming available.”

First-Time Buyers and Cash Transactions

First-time buyers slightly increased their market presence, accounting for 33% of April sales, up from 29% in the previous year. The share of all-cash transactions remained high at 28%, indicating robust demand from cash buyers.

Regional Sales Breakdown

- Northeast: Sales fell 4% from March and 4% from April 2023. The median price in this region was $458,500, reflecting an 8.5% year-over-year increase.

- Midwest: Sales decreased by 1% month-to-month and year-over-year. The median price here was $303,600, up 6% from April 2023.

- South: Sales dropped 1.6% from March and 3.1% from the previous year. The median price in the South was $366,200, showing a 3.7% year-over-year increase.

- West: Sales were down 2.6% for the month but rose 1.3% year-over-year. The median price in the West was $629,600, up 9.3% from April 2023.

Conclusion

The housing market continues to grapple with high mortgage rates and limited inventory, affecting sales and keeping prices elevated. While new inventory is expected to temper price increases, the current landscape poses challenges for both buyers and sellers. The shift in regional sales dynamics and the growing participation of first-time buyers highlight the evolving nature of the housing market. As economic conditions and mortgage rates fluctuate, the housing market will likely continue to experience significant shifts.