Existing home sales fell in March by the most in over a year as mortgage rates lurched upward amid higher inflation readings.
Existing home sales in March fell 4.3% to a seasonally adjusted annual rate of 4.19 million, the National Association of Realtors reported on Thursday, as higher mortgage rates priced out many would-be buyers and led many homeowners to avoid selling and having to reenter the home loan market.
The rate of home sales was down 3.7% from the year before.
Total housing inventory at the end of March was 1.11 million units, up 4.7% from February and 14.4% from a year ago.
The median price of an existing home in February was $393,500, an increase of 4.8% from the year before. Additionally, homes typically remained on the market for 33 days in March, down from 38 days in February.
“Though rebounding from cyclical lows, home sales are stuck because interest rates have not made any major moves,” NAR chief economist Lawrence Yun said. “There are nearly six million more jobs now compared to pre-COVID highs, which suggests more aspiring home buyers exist in the market.”
Mortgage rates crested at over 8% in October but then moderated a bit as investors thought the Federal Reserve would soon cut interest rates. But recent too-hot inflation reports have changed the calculus, and now investors think the Fed will cut far less than previously expected, with a smaller but growing chance of zero rate cuts in 2024.
As of Thursday, the average rate on a 30-year, fixed-rate mortgage was 7.41%, according to Mortgage News Daily, which tracks daily changes in rates. That is well up from a recent trough of 6.65% notched in December.
The higher mortgage rates are making buying a home right now less desirable. Typically, when mortgage rates rise, demand for homebuying falls and harms the housing market overall.
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High rates have also suppressed supply in the market. When the Fed cut interest rates in 2020, mortgage rates flatlined at historic lows, leading many people to enter the market. But after mortgage rates shot up as the Fed tightened, those who had locked in those prime rates have been holding off on reselling, causing a shortage of existing home sales on the market and putting pressure on the market for new homes.
New home sales were up nearly 6% on an annual basis in February, according to the most recent data from the Census Bureau.
