US Home Sales Dipped 2.4% in April, Third Straight Monthly Decline

Record price increases, mortgage rate hikes and record-low inventory are squeezing the vitality out of the US home-selling market like a hungry python.  

Existing home sales declined for the third straight month in April, with contract closings at their lowest level since the nadir of the pandemic in June 2020, according to new figures from the National Association of Realtors.

NAR reported that sales of previously owned US homes in April decreased by 2.4% in April from the prior month to an annualized rate of 5.61M.

Existing home sales have declined steeply from a peak of 6.5M in January, according to NAR’s data. Before this downturn, the annualized rate of home sales had largely recovered from a pandemic low of nearly 4M.

NAR’s data indicates that rising home prices and limited inventory, along with rising mortgage rates, are having a profound impact on the downward trend of home sales.

“Higher home prices and sharply higher mortgage rates have reduced buyer activity. It looks like more declines are imminent in the coming months, and we’ll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years,” Lawrence Yun, NAR’s chief economist, said in a statement.

NAR’s data showed that cash sales represented 26% of all home sale transactions in April, with investor purchases representing 17% of sales. Sales dropped in the South and West compared to March, but rose in the Northeast and Midwest, NAR reported.

According to data from the Mortgage Bankers Association, the 30-year-mortgage rate rose to 5.5% last week, a 2% increase from the 3.5% rate at the beginning of 2022. As the Fed ramps up a series of 50 bps prime rate increases, the cost of borrowing is likely to continue to increase.

The vicious inflationary cycle gripping the nation and the record low inventory of US homes for sale—exacerbated by delays in new construction and purchases for SFR—is pushing home prices beyond the reach of many first-time home buyers.

The median US home selling price rose 14.8% percent from a year earlier, to a record $391,000, in April. Median monthly mortgage payments are now approaching $2,000.

Based on the standard affordability metric that monthly mortgage payments should not exceed 30% of income, only six US states currently have median incomes high enough to afford mortgages for houses selling at the US median price, GlobeSt reported.

NAR data showed the number of homes for sale in April ticked up from the number in March, but the inventory was down 10.4% from a year ago. At the current pace of sales, it would only take about 2 months to exhaust the inventory.

NAR said properties remained on the market for an average of 17 days last month, compared to more than a month prior to the pandemic.

Existing-home sales make up about 90% of US housing and are calculated when a contract closes. The balance is made up by new-home sales, which are tallied based on contract signings.

NAR will release its data for new-home sales next week.