The housing market has seen its fair share of ups and downs, with April presenting its own set of challenges. According to the National Association of Realtors, sales of previously owned homes fell by 1.9% in April, coming in at 4.14 million units on a seasonally adjusted annualized basis. This decline was unexpected, as the forecast had predicted a slight gain. Let’s delve deeper into the factors contributing to this downturn in the housing market.
One significant factor that influenced the decrease in home sales in April was the spike in mortgage rates. Rates surged at the beginning of February, hovering around 7% for the following two months before experiencing even higher increases in April. This 300 basis point jump from pre-pandemic levels has put the housing market in uncharted territory. Lawrence Yun, chief economist for the Realtors, highlighted concerns regarding how the spike in mortgage rates would impact the lock-in effect on home sales.
Despite a 9% increase in total housing inventory from the previous month and a 16% increase from the previous year, the housing market is still grappling with supply challenges. With 1.21 million units available at the end of April, the current supply represents only a 3.5-month inventory at the current sales pace. A balanced market typically calls for a six-month supply, indicating that the market continues to favor sellers over buyers. Interestingly, the supply of homes priced above $1 million saw a significant surge of 34% year over year, driving heightened activity in that segment.
The tight supply in the housing market has exerted upward pressure on prices. The median price of existing homes sold in April reached $407,600, marking a 5.7% increase from the previous year and setting a new record high for April. The strong demand for homes has led to bidding wars, with 27% of homes selling above their list price. Yun noted that while the record high prices are beneficial for homeowners, there is an expectation for price increases to taper off as more housing inventory becomes available.
Sales data revealed regional disparities in housing market performance in April. In the Northeast, sales dropped by 4% from the previous month and 4% from the previous year, with a median price of $458,500, representing an 8.5% year-over-year increase. The Midwest saw a 1% month-to-month decrease in sales and a 1% year-over-year drop, with a median price of $303,600, up 6% from the previous year. Similarly, the South experienced a 1.6% decline in sales from March and a 3.1% decrease from the previous year, with a median price of $366,200, reflecting a 3.7% increase from the previous year. In contrast, sales in the West decreased by 2.6% from the previous month but rose by 1.3% from the previous year, with a median price of $629,600, up by 9.3% from the previous year.
The housing market’s performance in April underscores the complex interplay of factors influencing sales trends. From mortgage rate spikes to supply constraints and regional variations, the housing market is navigating a challenging landscape. However, as inventory levels improve and demand dynamics evolve, there is optimism for a more balanced market in the future. By closely monitoring these trends, stakeholders can gain valuable insights into the housing market’s trajectory and make informed decisions moving forward.