U.S. existing home sales fell unexpectedly in April, marking the second consecutive monthly decline as higher mortgage rates and rising house prices weighed on demand. The National Association of Realtors (NAR) reported on Wednesday that home sales dropped by 1.9% to a seasonally adjusted annual rate of 4.14 million units, contrary to economists' expectations of a rise to 4.21 million units. This decline comes despite an increase in housing inventory to a 2-1/2-year high, highlighting the scarcity of entry-level homes.
The housing market's setback follows a period of rapid growth in residential investment during the first quarter, driven by a resurgence in mortgage rates. "Elevated mortgage rates and rising prices are forcing potential home buyers to wait for buying conditions to improve," said Ben Ayers, senior economist at Nationwide. The average rate on the 30-year fixed-rate mortgage has struggled to dip below 7%, reaching a five-month high of 7.22% in early May, according to Freddie Mac. This trend has dampened homebuilder confidence and led to declines in single-family housing starts and building permits. Market Overview:
- U.S. existing home sales decline for the second month in a row as affordability wanes.
- Existing home sales fall 1.9% in April, missing expectations.
- Housing inventory increases but remains below pre-pandemic levels.
- Median house price jumps 5.7% year-over-year to a record high.
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Despite the overall drop in sales, housing inventory increased by 9% in April to 1.21 million units, the highest since October 2021. However, supply remains below pre-pandemic levels, with 1.8 million units reported in April 2019. Properties typically stayed on the market for 26 days in April, up from 22 days a year ago, indicating a still-tight housing supply. The increase in inventory was most notable in homes priced at $1 million or more, where supply rose by 34% from a year ago, and sales in this price bracket soared by 39.7%.
The median existing home price surged by 5.7% from a year earlier to $407,600, the highest price for any April on record. Home prices rose in all four regions, and at least 27% of homes sold above the listing price, reflecting multiple offers in some areas. First-time buyers accounted for a third of sales, the highest share since January 2021, yet still below the 40% needed for a robust market. All-cash sales made up 28% of transactions, while distressed sales, mainly foreclosures, represented only 2% of transactions.
