Homes in Centreville, Maryland, US, on Tuesday, April 4, 2023.
Nathan Howard | Bloomberg | Getty Images
Sales of previously owned homes declined 2.4% in March compared with February, according to a monthly report from the National Association of Realtors.
At a seasonally adjusted, annualized rate, that amounts to 4.4 million units. Sales were 22% lower than March of last year.
The weakness is likely due to a sharp jump in mortgage interest rates. With home prices still historically high, today’s buyers are increasingly sensitive to even daily moves in mortgage rates. The March sales were likely based on contracts signed in January and February, when rates were volatile.
The average rate on the popular 30-year fixed mortgage started January around 6.45%, and briefly dropped below 6% by the end of the month, according to Mortgage News Daily. But things turned around sharply in March, with the rate jumping straight back up to 6.45% in the first week of March and then continuing higher to end the month at 6.85%.
“Home sales are trying to recover and are highly sensitive to changes in mortgage rates,” said Lawrence Yun, chief economist for the NAR. “Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand. It’s a unique housing market.”
Supply did increase slightly, but it is still historically low. At the end of March, there were 980,000 homes for sale, an increase of 1% from February and 5.4% from March 2022. At the current sales pace, that represents just a 2.6-month supply. A six-month supply is considered a balanced market between buyer and seller.
Inventory is now 41% lower than pre-Covid pandemic levels in 2019. New listings were down 17% from March 2022. The reason supply is higher is simply because homes are staying on the market longer, an average 29 days compared with 17 days a year ago.
That tight supply is keeping home prices from cooling quite as much as some had predicted. The median…
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