What does a sluggish market mean for future homeowners?
Home sales in the US have fallen to their slowest April pace since 2009, as consumers grapple with elevated prices and economic uncertainties, according to a report from the National Association of Realtors (NAR). The slowdown comes despite a significant increase in housing inventory, which typically signals a more balanced market.
Sales of previously owned homes in April dipped 0.5% from March, reaching a seasonally adjusted annual rate of 4 million units. This figure also represents a 2% decline from April of last year, confounding housing economists who had anticipated a gain. The data, based on completed sales, largely reflects contracts signed in February and March, prior to a further rise in mortgage rates during April.
Lawrence Yun, chief economist for NAR, noted that, “Home sales have been at 75% of normal or pre-pandemic activity for the past three years, even with seven million jobs added to the economy.” He emphasized a growing “pent-up housing demand” that remains unrealized, suggesting that “any meaningful decline in mortgage rates will help release this demand.”
Despite the sluggish sales, the median price of an existing home sold in April reached $414,000, marking a 1.8% increase year over year, CNBC reported. While this is the highest April price on record, it represents the slowest appreciation rate since July 2023. Both the South and West regions experienced price declines.
Inventory rises, buyer behaviors shift
Inventory saw a substantial jump, rising 9% month over month and nearly 21% higher than April of last year. There were 1.45 million homes for sale at the close of April, translating to a 4.4-month supply at the current sales pace. While this is the highest supply level in five years, it still falls short of the six-month supply considered a balanced market.
Yun commented, “At the macro level, we are still in a mild seller’s market. But with the highest inventory levels in nearly five years, consumers are in a better situation to negotiate for better deals.”
Homes spent an average of 29 days on the market, a quicker pace than March but longer than April of last year. First-time buyers accounted for 34% of sales, largely consistent with last year’s figures. The rate of contract cancellations also saw an uptick, rising to 7% of sales in April from a recent average of 3% to 4%.
Activity remained stronger at the higher end of the market, with sales of homes priced over $1 million increasing by nearly 6% from a year ago. Conversely, homes priced between $100,000 and $250,000 saw a drop of just over 4%. However, Yun observed a shrinking of gains at the high end, attributing it partly to “the stock market shakeout that has occurred.”
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