March home sales fall as mortgage rates, home prices climb

Pre-occupied home sales in the U.S. slowed to a slower pace in March in nearly two years due to a rapid rise in mortgage rates and record prices aspiring discouraged home buyers.

Existing home sales fell 2.7 percent last month from February to a seasonally adjusted annual rate of $ 5.77 million, the National Association of Realtors said Wednesday.

This is in line with what economists expected, according to FactSet. It is also the slowest pace since June 2020, when sales were at an annualized rate of 4.77 million homes. Sales were down 4.5% from March 2021.

The slowdown came as mortgage rates rose, and the average rate on a 30-year fixed-rate home loan rose to 4.7% at the end of last month. Last week, the average reached 5% for the first time in more than a decade persistent high inflation. A year ago, the 30-year rate stood at 3.04%, according to Freddie Mac.

“For now, my view, based on randomly looking at the data, is that home sales could easily go down 10% this year from last year,” said Lawrence Yun, chief economist. of NAR.

Yun also suggested that the average annual growth in house prices could slow to 5% in December.

Rising mortgage rates are complicating the home buying equation during the spring home buying season, traditionally the busiest period for home sales.

Rates are rising after a sharp rise in 10-year Treasury yields, reflecting the expectations of higher interest rate investors in general as the Federal Reserve raises short-term rates to combat the rise of inflation.

Higher mortgage lending may limit the group of buyers and reduce the rate of home price growth, which is good news for buyers, although higher rates also weaken their purchasing power.

A sellers market

For now, the housing market continues to favor sellers, as buyers compete for less housing, leading to supply wars that often cause the sale price to be well above the owner’s original sale price.

The average home price in March rose 15% from a year ago to $ 375,300. That’s a record high of data dating back to 1999, NAR said.

On average, the homes were sold in just 17 days after they hit the market last month. The average was 18 days in February. In a more balanced market between buyers and sellers, homes typically stay on the market for 45 days.

As usual in the spring, the number of homes on the market increased in March compared to the previous month. Some 950,000 properties were available for sale at the end of March, 11.8% more than in February, but 9.5% less than in March 2021.

At the current rate of sales, the level of available properties for sale amounts to a 2-month supply, the NAR said. This is an increase of 1.7 months in February and a decrease of 2.1 months from a year ago.

Real estate investors and other wealthy buyers who were able to buy a home without depending on financing, pushed for a sharp rise in cash transactions last month. They accounted for 28% of all sales, the highest share since July 2014, NAR said.

Homes bought by investors accounted for 18% of sales, 15% more than in March 2021, while first-time buyers accounted for 30% of transactions, a 29% increase in February and a 32% drop. % of March last year.