money Existing home sales slide for third straight month
Housing activity tumbled for the third straight month in April, as soaring borrowing costs weighed on would-be buyers.
Existing home sales fell to a seasonally adjusted 5.61 million units in April from a month earlier, according to the National Association of Realtors (NAR). That was down 2.4% from March and 5.9% from one year ago. The results came under analysts’ expectations of 5.64 million units, according to Bloomberg consensus estimates.
The figures underscore the tough conditions buyers face: low inventory, rising prices, and higher mortgage rates.
“Higher home prices and sharply higher mortgage rates have reduced buyer activity,” said Lawrence Yun, NAR’s chief economist. “It looks like more declines are imminent in the upcoming months, and we’ll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years.”
Home prices remain elevated
The median listing price in April swelled to a new record $391,000, up 14.8% from April 2021. According to NAR, the numbers reflect fewer large listings and more mid-sized homes entering the market. Realtor.com analysts said growing home prices have increased the cost of financing 80% of a typical home listing by almost 50% compared with a year ago.
The steep climb in home prices remains a challenge for buyers, who haven’t gotten a break as high mortgage rates also continue to squeeze budgets thin. At the same time, first-time buyers are seeing their budgets shrink dealing with rapid rent growth and inflation at 40-year highs.
“Home affordability has taken a sacrificial hit under the Fed’s continued plan to reign in [consumer price] growth by tightening financial conditions,” Matt Dines, chief investment officer and co-founder of Build Asset Management, said in a statement. “Buyers face the highest lending rates since the 2008 financial crisis.”
The rate on the 30-year fixed mortgage – the most popular home loan used in home purchases – hit 5.25% Thursday, according to Freddie Mac. While rates pulled back slightly from 5.3% last week, they are still elevated —up from 3.22% in the first week of the year.
High borrowing costs are also dissuading many homeowners from selling and trading up, so they don’t give up their current ultra-low mortgage rate for a higher monthly payment. As a result, buyers continue to face a shortage of properties within their budgets.
“Trade-in buyers face a constraint from existing homeowners locked in on existing mortgages taken out under historically low borrowing rates in 2020 and 2021,” said Dines.
While inventory levels inched up last month, conditions remain unfavorable for buyers. The inventory of unsold existing homes rose to 1.03 million by the end of April, equal to 2.2 months supply at the present sales pace and 10.4% lower than a year ago. A balanced market is 6 months supply.
“It’s a very tight market,” Yun said.
New residential construction in April also came in below consensus expectations for April, according to Mark Fleming, chief economist First American. Housing starts were expected to decrease to an annual pace of 1.75 million, but registered at 1.724 million.
“Builders continue to face supply chain disruptions, rising input costs, and concerns that declining affordability is pricing out potential buyers, particularly first-time buyers, which are the most rate sensitive,” Fleming said.
Despite affordability challenges, buyers are snapping up what’s available in record time. The average listing is on the market for 17 days, the same as last month and a year ago. In the pre-pandemic market, a listing would have stayed on the market between 30 to 40 days on average.
“It’s a very swift moving market,” Yun said. “You list a home and a contract is ratified in 17 days.”
Gabriella is a personal finance reporter at Yahoo Money. Follow her on Twitter @__gabriellacruz.
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