The National Association of Realtors reported a 1.9% decrease in the sales of previously owned homes in April, contrary to the forecasted slight gain. The decline in sales can be attributed to the increase in mortgage rates, which escalated by 300 basis points from the pre-Covid pace. This substantial jump in interest rates has created uncertainty in the housing market, impacting the overall demand for homes. Lawrence Yun, the chief economist for the Realtors, highlighted the potential consequences of these elevated mortgage rates on the housing market, suggesting that the lock-in effect may restrain home sales in the coming months.
Despite the increase in total housing inventory by 9% month-to-month and 16% year-over-year, the supply of homes still remains limited, with only a 3.5-month supply at the current sales pace. Typically, a balanced market between buyers and sellers is characterized by a six-month supply of homes. The shortage of inventory has put pressure on home prices, with the median price of existing homes reaching $407,600 in April, representing a 5.7% annual increase. The rise in prices has led to 27% of homes selling above the list price, indicating strong competition among buyers for limited available properties.
Market Segmentation
Interestingly, the market has witnessed a divergence in sales performance based on the price range of homes. Sales of homes priced below $100,000 experienced a 7.1% decline year-over-year, while sales of properties priced over $1 million surged by 40%. This disparity is further reflected in the supply of luxury homes priced above $1 million, which saw a notable 34% increase from the previous year. The heightened activity in the luxury segment can be attributed to the relative abundance of inventory and the strong demand from affluent buyers.
Regionally, the housing market exhibited varying trends in different parts of the country. Sales in the Northeast declined by 4% from March and 4% from April 2023, with the median price increasing by 8.5% year-over-year to $458,500. In the Midwest, sales dropped by 1% month-to-month and year-over-year, while the median price rose by 6% to $303,600. Similarly, sales in the South decreased by 1.6% from March and 3.1% from the previous year, with the median price rising to $366,200. In the West, sales decreased by 2.6% for the month but rose by 1.3% year-over-year, with the median price reaching $629,600, up by 9.3% compared to April 2023.
First-time buyers represented 33% of home sales in April, showing a slight increase from 29% the previous year. However, the all-cash transactions remained high at 28% of all sales, indicating the presence of investors and affluent buyers in the market. The resurgence of first-time buyers is a positive sign for the housing market, as it signifies a broader participation of entry-level buyers and potential growth in homeownership rates.
The analysis of home sales and market trends in April highlights the complex interplay of factors influencing the housing market. From mortgage rate fluctuations to inventory shortages and regional variations in sales performance, the real estate sector is navigating through a period of transition and adjustment. As prices continue to soar and inventory levels fluctuate, stakeholders in the housing market must stay vigilant and adaptable to the evolving dynamics to make informed decisions and capitalize on emerging opportunities.