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Home Sales Tank in April as Prices and Mortgage Rates Continue to Climb
May 29, 2024
The spring homebuying season got off to a slow start in April as higher mortgage rates and elevated prices kept buyers sidelined.
Sales of existing homes, which make up the bulk of the housing market, fell 1.9% from March to April to a seasonally adjusted annualized basis of 4.14 million units, according to the National Association of Realtors. Wall Street had been expecting a slight gain. On an annual basis, sales were also down 1.9%.
Sales of newly built homes plummeted, however, dropping 4.7% in April from the month prior and an even larger 7.7% from a year earlier, according to the U.S. Census Bureau. March’s sales were also revised significantly lower.
Higher mortgage rates are clearly weighing on the housing market. April’s reading of existing homes is based on closings, meaning the contracts were likely signed in March, when the average rate for a 30-year fixed mortgage was in the high 6% range. The month’s reading of newly built home sales, however, was based on signed contracts, meaning the deals were made in April, when mortgage rates had shot up to more than 7.5%, further straining affordability.
The median price of a new home sold in April was $433,500, 4% higher than it was in April 2023. Some of that increase was due to the types of homes selling, which were mostly concentrated on the higher end of the market. Those buyers are not as influenced by mortgage rates, as they often use all cash. The month also saw sales of homes priced under $100,000 fell 7.1% year over year, while sales of homes priced over $1,000,000 jumped 40% from last year.
The slowdown in sales came even as the supply of homes grew. Total housing inventory at the end of April stood at 1.21 million units, an increase of 9% from the month prior and up 16% from the year before. However, even the increased supply represents just a 3.5-month supply at the current sales pace. Experts generally consider a six-month supply to represent a balanced market between buyers and sellers.
