Home Sales, Mortgage Demand, and Builder Sentiment Fall as Housing Market Cools
May 19, 2022
Surging mortgage rates, sky-high prices, and low inventory are weighing heavily on prospective buyers and builders alike as several key gauges of the housing market have fallen to the lowest levels since the early days of the pandemic.
Sales of previously owned homes in April fell 2.4% from March to a seasonally adjusted annualized rate of 5.61 million units, according to the National Association of Realtors. Sales were 5.9% lower than in April 2021, and April’s sales pace was the lowest since June 2020.
Inventory at the end of April stood at 1.03 million homes for sale, a drop of 10.4% from the year prior. At the current pace of sales, that represents just a 2.2-month supply.
Low inventory has kept home prices high, and the median price of an existing home sold in April hit a new record high of $391,200, an increase of 14.8% from a year earlier.
Affordability is also being diminished by climbing mortgage rates, which for a 30-year fixed-rate loan have jumped from 3.18% last year to 5.53% last week.
The one-two punch of higher home prices and more expensive lending has cooled buyer demand. Applications for a mortgage to purchase a home are down 12% from the week before and 15% lower than during the same week last year.
Despite strong demand and low inventory, sentiment among builders of single-family homes has continued to decline. Sentiment dropped 8 points in May to 69, according to the National Association of Home Builders/Wells Fargo Housing Market Index. While any reading above 50 is considered to be positive, this makes the fifth consecutive month that sentiment has fallen, and it is now at the lowest point since June 2020.