Northwest Arkansas Democrat-Gazette
Previously-owned home sales slump by most since ’15
Sales of previously-owned U.S. homes dropped in March by the most since November 2015, representing weaker demand that likely is going to get much worse in coming months as the pandemic bears down on the economy.
Contract closings declined 8.5% to an annualized 5.27 million, the slowest since April 2019, from a downwardly revised 5.76 million in February, the National Association of Realtors said Tuesday. The median forecast in a Bloomberg survey of economists called for a 5.25 million rate in March.
The situation will likely get worse, said Danielle Hale, chief economist at realtor. com.
“Going forward, we’ve seen both home buyers and sellers report being less confident and many are making adjustments to the process,” Hale said. “Already, sellers are getting less aggressive with asking price growth, and we’re seeing roughly half as many new listings come up for sale this year versus last year.”
Home-buying had been steady for the first half of March because of low mortgage rates and the finalization of contracts signed in prior months, only to collapse in response to covid-19 burying the economy in a likely recession.
Businesses and schools have closed and millions of Americans have lost their jobs.
Sales in March were still 0.8% higher from a year ago, when mortgage rates were higher than now.
“Based on what we are seeing at the moment, don’t be surprised if the sales activity could be down as much as 30% or even 40% in the next couple of months,” said Lawrence Yun, the associations’
chief economist.
The median sales price increased 8% in March from a year earlier to $280,600. So far, selling prices are holding up even as sales decline because of a lean number of listings, Yun said.
Available inventory was down 10.2% from a year earlier, to 1.5 million. At the current pace, it would take 3.4 months to sell all the homes on the market. Realtors see anything below five months of supply as a sign of a tight market.
This shortage appears to be most pronounced among entry level homes. The total number of sales of homes worth less than $250,000 has fallen over the past year because there are so few available.
The first half of the month “held up reasonably well, but it was the second half of March where we are seeing a measurable decline in activity,” Yun said. Many potential home sellers are delaying listing their properties in the current economic environment, he noted.
Purchases dropped in all four U.S. regions. They slumped 13.6% in the West, declined 9.1% in the South and fell 3.1% in the Midwest. Northeast sales decreased 7.1%.
Single-family home sales decreased 8.1% to 4.74 million units, also the slowest pace since April 2019.
Existing-home sales account for about 90% of U.S. housing sales and are calculated when a contract closes. New-home sales, which make up the remainder, are based on contract signings and will be reported Thursday.
Prices have been consistently rising faster than incomes for several years, and now the coronavirus outbreak lockdowns have put millions of Americans out of work.
The Mortgage Bankers Association said Monday that 6% of mortgages are under forbearance because of the downturn.
“With over 22 million Americans filing for unemployment over the past month, homeowners are contacting their mortgage servicers seeking relief, leading to a sharp increase in the share of loans in forbearance across all loan types,” Mike Fratantoni, the mortgage industry trade association’s senior vice president and chief economist, said. “Mortgage servicers continue to receive a very high level of forbearance requests, but volumes were down somewhat compared to the prior week.
“Given that lockdowns and associated job losses will continue in the coming weeks, forbearance inquiries will likely rise again as we approach May payment due dates.
“Borrowers facing covid19-related hardships should contact their servicer to review all of their options.”
About 3.5 million U.S. home loans are already in payment forbearance, the American Enterprise Institute estimates.
The Mortgage Bankers Association survey covers almost 77% of the country’s first-mortgage servicing market.
Information for this article was contributed by Reade Pickert of Bloomberg News, by Josh Boak of The Associated Press and by Steve Brown of The Dallas Morning News.