The spring homebuying season continued to face challenges last month due to high mortgage rates and rising prices.
According to a report released by the National Association of Realtors on Wednesday, existing home sales decreased by 1.9% in April, reaching a seasonally adjusted annual rate of 4.14 million, down from a revised 4.22 million in March. The decline in sales was observed across all regions of the country, with the Northeast experiencing the largest drop at 4%, followed by the West at 2.6%, the South at 1.6%, and the Midwest at 1%.
The median price of previously occupied homes rose to $407,600, marking a 5.7% increase and setting a record for April. This was the tenth consecutive month of price increases. Lawrence Yun, the association’s chief economist, expressed frustration with the sales drop, as economists had expected sales to reach 4.2 million.
The benchmark 30-year, fixed-rate loan has increased in five of the last six weeks, currently standing at 7.02%, up from 6.39% a year ago. In addition to high mortgage rates, potential homebuyers are also deterred by the elevated prices, which are partly caused by a limited inventory of available homes.
Although the supply of homes increased by 9% from March to 1.2 million, marking the fourth consecutive month of growth, it remains low compared to the pre-pandemic level of 1.7 million. Homeowners have been hesitant to put their houses on the market, partly because they don’t want to give up their existing mortgages with low interest rates and purchase new homes at higher rates.
The housing market could experience some relief if the Federal Reserve decides to cut interest rates later this year. Robert Frick, an economist at the Navy Federal Credit Union, noted that normally, there would be a surge in home sales at this time of year, but mortgage rates continue to suppress listings and buying activity. He also pointed out that the rising prices are pushing the opportunity of homeownership further away from lower-income and even middle-income Americans. Frick believes that the only real relief will come when the Fed cuts rates later this year, which will eventually impact mortgage rates.
The high-end of the market, however, saw a significant increase in sales, with homes priced at $1 million or more jumping by 40% compared to a year ago. This surge can be partly attributed to a 34% increase in the inventories of these high-end homes.
First-time buyers accounted for a third of all sales, the highest share since January 2021, but still below the historical average of 40%.
The Associated Press contributed to this article.