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Overview
The residential real estate market has experienced a slow start in the second quarter of the year, with home sales activity easing further in April. Although market activity typically increases during spring, rising mortgage rates over the past few months have kept home sales subdued. Nevertheless, home prices continued to increase, surpassing April’s $400,000, a record high. While the market saw an increase in inventory in April, this additional housing stock may boost activity in the coming months. NAR expects inventory to continue to grow steadily from home construction while solid job growth and demographic trends will keep demand strong in the market.
Parsing out by region, in April, the West was the only region where home sales activity exceeded that of the previous year. However, all four regions saw a decline in home sales compared to March, with the Northeast experiencing the largest drop. While home prices continue to increase, the West recorded the highest price gains than any other region, with the typical home worth 9% more than the previous year. With more homes being completed and mortgage rates likely to fall below 7% in the second half of the year, the housing market is expected to gain momentum in the following months.
The Federal Reserve maintained its short-term interest rate at 5.5% in April, unchanged since August 2023. A further slowdown of inflation expected in the following months may enable the Fed to cut rates in the second half of the year. The Fed aims to reduce inflation to its 2% average target.
The growth of the U.S. labor market slowed down while the unemployment rate rose to 3.9%. One hundred sixty-five thousand net payroll jobs were added in April, below the average monthly gain of 232,000 over the last 12 months. Based on the revised estimates from the BLS, the construction industry had no job gains this month, following a creation of 37,000 jobs added in March.
Inventory has consistently increased since the beginning of the year. In April, the inventory of unsold listings increased by 3.5% compared to the previous months, standing at 1.21 million homes for sale. Compared to last year, inventory levels were up 16.3%. However, even with this increase, demand continues to outpace housing supply, leading to rising home prices.
