Existing home sales shrank in March as consumers respond to continuing price increases and rising mortgage rates.
Sales for existing homes fell 4.3% in March compared to the previous month and 3.7% year-over-year, to an annual rate of 4.19 million, according to a press release from the National Association of Realtors (NAR). The average for a 30-year fixed-rate mortgage reached 7.10% this week, a substantial jump from 6.88% last week, depressing Americans’ desire to switch homes and possibly acquire a higher interest rate, according to a release from real estate giant Freddie Mac.
The decline in existing home sales is the biggest drop in over a year, according to The Wall Street Journal.
“Though rebounding from cyclical lows, home sales are stuck because interest rates have not made any major moves,” Lawrence Yun, NAR Chief Economist, said in the NAR press release. “There are nearly six million more jobs now compared to pre-COVID highs, which suggests more aspiring home buyers exist in the market.”
The total for housing inventory increased by 4.7% in March from the month prior and by 14.4% from a year ago, totaling 1.11 million, according to the NAR. The median home price rose for the ninth consecutive month in terms of year-over-year changes, reaching an average of $393,500, the highest ever recorded in March.
“The 30-year fixed-rate mortgage surpassed 7% for the first time this year, jumping from 6.88% to 7.10% this week,” Sam Khater, Chief Economist at Freddie Mac, said in its press release. “As rates trend higher, potential homebuyers are deciding whether to buy before rates rise even more or hold off in hopes of decreases later in the year. Last week, purchase applications rose modestly, but it remains unclear how many homebuyers can withstand increasing rates in the future.”
The average for a 30-year fixed-rate mortgage has skyrocketed since 2021, when it started below 3%, reaching a recent peak in October 2023 of nearly 8%, according to the Federal Reserve Bank of St. Louis. Hikes to the federal funds rate by the Federal Reserve, which currently sits in a range of 5.25% and 5.50%, have led to increases in the average mortgage rate, with recent speculation around delayed rate cuts pushing mortgage rates up.
Prices for housing have been hit particularly hard by high rates of inflation under President Joe Biden, rising 20.5% since January 2021 and 5.65% year-over-year as of March. Housing prices could continue to rise rapidly as inflationary pressures work their way through the economy, with long-term agreements like leases and mortgages making shelter costs stickier than other goods.
