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The spring housing market is off to a sluggish start, with home sales falling in March. Economists say a resurgence in mortgage rates and inflation could be softening sales at the start of what is traditionally real estate’s busiest season. Despite the headwinds, sellers continue to see home prices grow, buyers’ appetite for housing remains high and bidding wars are still occurring. On top of that, a growing job market may offer some rosier prospects for more sales.
Existing-home sales dropped 4.3% in March compared to the previous month and are nearly 4% lower than a year ago, the National Association of REALTORS® reported Thursday. While more listings came on the market last month, the increased competition among sellers didn’t appear to hurt home prices. The median existing-home sales price increased 4.8%, reaching $393,500—the highest price ever recorded for March, NAR reports.
Meanwhile, builders pressed the brakes on new-home construction, sensing buyer hesitancy from rising mortgage rates. Builders also reported facing higher construction costs and tighter lending conditions last month. The Commerce Department reported this week that permits for single-family housing starts dropped to a five-month low, indicating a slowdown in future construction as well.
Spring Thaw?
Nevertheless, homebuying and selling sentiment remains strong, according to Fannie Mae’s latest Home Purchase Sentiment Index. “Both our ‘good time to buy’ and ‘good time to sell’ measures continued their slow upward drift this month,” says Doug Duncan, Fannie Mae’s chief economist. “However, consumers took a slightly more pessimistic view on the likely direction of mortgage rates, reflecting the fact that actual mortgage rates have moved upward since the start of the year. With the historically low rates of the pandemic era now firmly behind us, some households appear to be moving past the hurdle of last year’s sharp jump in rates, an adjustment that we think could help further thaw the housing market.” Fannie Mae predicts a gradual increase in sales transactions and home listings this year.
Indeed, NAR Chief Economist Lawrence Yun notes there are nearly 6 million more jobs compared to pre-COVID highs. That “suggests more aspiring home buyers exist in the market,” he says.
Latest Housing Data
Existing home sales fell in March in the Midwest, South and West but rose in the Northeast for the first time in about four months. Here’s a closer look at key housing indicators from NAR’s latest report:
- Housing inventories are rising: Total housing inventory was up nearly 5% compared to February and up 14.4% from a year ago. “More inventory is always welcomed in the current environment,” Yun says. “Frankly, it’s a great time to list, with ongoing multiple offers on mid-priced properties and, overall, home prices continuing to rise.”
- Home prices climb: The median existing-home price for all housing types was $393,500, up 4.8% compared to a year earlier. All four major regions of the U.S. posted price gains last month, led by the Northeast and Midwest.
- Days on the market up slightly from a year ago: Properties typically remained on the market for 33 days. That is a quicker pace than the 38 days recorded in February but is up from 29 days a year ago.
- First-time buyers are increasing: The share of sales to first-time home buyers grew to 32%, up from 26% in February and 28% from a year earlier.
- All-cash sales still remain high: All-cash sales comprised 28% of transactions, down from 33% in February but up from 27% a year earlier. Individual investors and second-home buyers tend to make up the biggest bulk of all-cash sales. They accounted for 15% of sales, up slightly from 17% a year ago.
Regional Breakdown
Here’s a closer look at how home sales fared across the country in March, according to NAR’s report:
- Northeast: Existing-home sales rose 4.2%, reaching an annual rate of 500,000. Home sales are down 3.8% from a year ago. Median price: $434,600, up 9.9% from one year ago.
- Midwest: Sales dropped 1.9% compared to a month ago, reaching an annual rate of 1.01 million. Sales are down 1% from the prior year. Median price: $292,400, up 7.5% from March 2023.
- South: Sales fell 5.9% compared to February, settling in at an annual rate of 1.9 million. Sales are 5% lower than a year earlier. Median price: $359,100, up 3.4% from last year.
- West: Sales decreased 8.2% from a month ago, reaching an annual rate of 780,000. Sales declined 3.7% from the previous year. Median price: $603,000, up 6.7% from March 2023.
