With geopolitical tensions still looming over the housing market (and the economy), the latest existing-home sales data from the National Association of Realtors® (NAR) did not paint a picture of a strong spring market ahead.
However, despite sales lagging, inventory and affordability show definite year-over-year improvements, a possible bright light at the end of the tunnel.
NAR’s Existing-Home Sales report saw sales fall 3.6% month-over-month and 1% year-over-year in March to a rate of 3.98 million (down from 4.09 million in February). This is a nine-month low, and the “slowest pace of March home sales since 2009,” according to Bright MLS Chief Economist Lisa Sturtevant.
NAR Chief Economist Lawrence Yun characterized home sales as “sluggish,” noting that “lower consumer confidence and softer job growth continue(s) to hold back buyers.”
Realtor.com® Chief Economist Danielle Hale said she and others had “expected a stronger March reading, thinking many homebuyers would likely have locked in a mortgage rate before the rate reset.”
In terms of housing segments, single-family existing-home sales fell 3.5% month-over-month and 0.3% year-over-year to a rate of 3.63 million. Condo and co-op sales fell 5.4% month-over-month and 7.9% year-over-year to a rate of 350,000.
Regionally, month-over-month sales fell in all four regions, while year-over-year sales were more mixed.
The Northeast saw an 8.5% month-over-month and 12.2% year-over-year drop in sales to a rate of 430,000. Sales in the Midwest fell 4.2% month-over-month and 3.2% year-over-year to a rate of 920,000. The South saw a 3.1% month-over-month fall, but a 2.2% year-over-year rise to a rate of 1.86 million. Sales in the West fell 1.3% month-over-month, but rose 1.3% year-over-year to a rate of 770,000.
More positively, inventory saw an improvement in March. Inventory sits at 1.36 million units, up 3% month-over-month and 2.3% year-over-year. This is a 4.1-month supply of unsold inventory, which is up from 3.8 months last month and up from four months one year ago.
Sturtevant said that this improvement is a “a welcome development for the spring season,” but noted that it “remains to be seen if more choices will be enough incentive for buyers to enter the market in large numbers.”
Despite the increase, Yun noted that inventory remains a “major constraint on the market.”
“The inventory-to-sales ratio, or supply-to-demand ratio, is below historical norms,” he continued. “An additional 300,000 to 500,000 homes for sale would help bring the market closer to normal conditions and allow consumers to make purchase decisions without feeling rushed.”
As inventory overall remains more constrained, home prices continue to rise, hitting a “new record high for the month of March,” Yun added.
The median home price for all home types came in at $408,800, up 1.4% from one year ago and the 33rd consecutive month of year-over-year price increases. The single-family median price grew 1.3% year-over-year to $412,400, and the condo and co-op median price grew 2.3% to $371,500. The Northeast grew 5.7% to $494,500, the Midwest grew 4.9% to $315,500, the South ticked up 0.8% to $362,600 and the West grew 1.3% to $613,400.
Yun also noted that the growth in home prices has “helped the typical homeowner accumulate $128,100 in housing wealth over the past six years.”
Price increases did lower NAR’s Housing Affordability Index to 113.7 in March, down from 117.5 in February. However, the index is up from 104.2 a year ago, and all four regions saw year-over-year growth:
- Northeast +4.1%
- Midwest +5.3%
- South +10%
- West +12.7%
Looking ahead, Yun said that NAR has “trimmed” its home sales outlook for the year due to rising mortgage rates.
“Even with a more modest pace of sales growth, home prices continue to steadily increase due to minimal inventory growth,” he continued.
Hale noted that “because March sales are largely based on activity that predated recent mortgage rate headwinds, this figure could serve as a sales ceiling until conflict in the Middle East ebbs and financial markets reflect this, which means it could be yet another tough spring for the housing market.”
Sturtevant agreed, adding that the “momentum of the spring market remains fragile” due to continued geopolitical tensions with Iran causing higher mortgage rates and gas prices.
“A resolution to the conflict will help support a rebound in the housing market,” she continued. “However, if uncertainty, higher prices and mortgage rates persist, this could be a very slow spring.”
