Existing-home sales in April saw their sharpest price decline in more than a decade, reflecting the first significant year-over-year decline in housing prices, which have remained stubbornly high even as the broader housing market has slowed down due to higher borrowing costs.
Sales of existing homes fell by 3.4 percent in April from a month earlier, and dropped 23.2 percent from the previous year, according to the NAR.
“Home sales are bouncing back and forth but remain above recent cyclical lows,” NAR chief economist Lawrence Yun said in a news release. “The combination of job gains, limited inventory and fluctuating mortgage rates over the last several months have created an environment of push-pull housing demand.”
The housing market has been in a slowdown due to the Federal Reserve’s aggressive interest rate hikes over the past year as it tried to tame inflation. Higher interest rates have sent the cost of mortgages skyrocketing. The average 30-year fixed rate mortgage was 6.35 percent, according to Freddie Mac’s benchmark survey, while most homeowners who bought during the record low interest rates have been holding on to their home loans.
At the end of 2022, most homeowners had mortgage rates below the current average. Sixty-two percent of mortgage holders had rates under 4 percent, while 82 percent had a rate below 5 percent, according to Redfin data.
Meanwhile, far fewer houses have been put up for sale, since it’s so much pricier to buy a house thanks to both pricier mortgages and higher prices for houses, which haven’t budged much. For months this has generally led to a slowdown in the number of houses sold, but the prices for homes hadn’t notched down in a significant way. The April figures show that housing prices are also finally trending down.
They also show that houses might be getting snapped up quicker. In April, properties generally stayed on the market for 22 days, down from 29 days in March. That still far exceeds the 17 days homes remained on the market in April 2022, according to the NAR data.
“The key story is that, in terms of sales, we’re close to a bottom,” said Gus Faucher, chief economist at PNC Financial Services Group. “In terms of prices, there’s still room to fall and affordability is still a problem, particularly given the high mortgage rates.”
Faucher added that the Federal Reserve, which has raised interest rates at its fastest pace in years, will likely see the housing price drops as a promising sign that its efforts to control rising prices are paying off. And he said he also expects the falling home prices to lead to slower growth in the rental housing market.
“I think this certainly supports the idea that the Fed can take a pause in June and not raise the Fed funds rate, because they want to see how these effects work their way through the economy and in particular on inflation,” he said.
