A sign for the upcoming sale was placed in front of a home for sale on March 18, 2022 in San Anselmo, California.
Justin Sullivan Getty Images
According to the National Association of Retailers, sales of previously owned homes fell to their lowest level since the beginning of the Covid pandemic in April.
Sales of existing homes fell 2.4 percent from March to a seasonally adjusted annual rate of 5.61 million units, the group said. Sales were 5.9% lower than in April 2021. This is the slowest pace since June 2020, which was artificially slow as the economy struggled with large-scale shutdowns due to the coronavirus.
This census represents the end of the month, so it reflects contracts probably signed in February and March, when interest rates on mortgages rose. The average interest rate on the 30-year fixed mortgage started in February at 3.66% and ended in March at 4.78%, according to Mortgage News Daily. It is now around 5.45%.
“We are returning to pre-pandemic sales, but I expect further declines,” said Lawrence Yun, chief economist at NAR, citing that rates are now higher than they were when the contracts were signed.
Buyers not only struggled with rising prices, but also saw very little relief from the shortage of homes for sale. Availability at the end of April amounted to 1.03 million homes for sale, which is 10.4% less than in April 2021. At the current rate of sales, this represents a delivery of 2.2 months.
Limited supply kept house prices higher, despite rising interest rates. The average price of an existing home sold in April was $ 391,200, the highest in history, up 14.8 percent from a year earlier.
This median is distorted higher because sales remain more stable at the higher end of the market, where supply is more stable. Sales of homes priced between $ 100,000 and $ 250,000 fell 29% year-on-year, while sales of homes priced between $ 500,000 and $ 750,000 rose 19%. Home sales of more than $ 1 million rose 16 percent from a year ago.
Sales continue to be fast, with the average home being on the market just 17 days before entering into a contract. Cash sales remained high – 25% of all sales. Investors make up 17% of sales, and first-time buyers make up only 28%. Historically, first-time buyers typically make up about 40% of the market.
“The number of households interested in becoming homeowners remains high, despite declining confidence that now is a good time to buy. This is especially true among younger home buyers, who are likely to be first-time buyers struggling to save on reduced payments as rents continue to break records, “Daniel Hale, chief economist at Realtor.com, said. At the same time, sellers’ expectations for higher down payments seem to be rising, fueled by the still competitive housing market and recurring buyers with relatively more equity at their disposal.
Sales of newly built homes will be reported next week, but mortgage applications for these homes fell nearly 11% during the month compared to April 2021, according to the Mortgage Bankers Association.
“The activity of buying new homes declined on a monthly and annual basis in April as the rise in mortgage interest rates dampened demand and home builders continued to struggle with rising costs, supply chain problems and extended deadlines.” said Joel Kahn, an MBA associate. Vice President of Economic and Industrial Forecasting.
The MBA predicts that new home sales will fall for the fifth consecutive month to the slowest pace since May 2020.