Home sales tumble again as mortgage rates surge
Sales of previously occupied U.S. homes slowed for the third consecutive month in April as mortgage rates surged, driving up borrowing costs for would-be buyers as home prices soared to new highs.
Existing home sales fell 2.4% last month from March to a seasonally adjusted annual rate of 5.61 million, the National Association of Realtors said Thursday.
That was slightly higher than what economists were expecting, according to Factset. Sales fell 5.9% from April last year. After climbing to a 6.49 million annual rate in January, sales have fallen to the slowest pace since June 2020, near the start of the pandemic, when they were running at an annualized rate of 4.77 million homes.
The median home price in April jumped 14.8% from a year ago at this time to $391,200. That’s an all-time high according to data going back to 1999, NAR said.
“Without a doubt, rising mortgage rates, rising prices are hurting affordability, but we should not discount that we’re still lacking inventory,” said Lawrence Yun, NAR’S chief economist.
Fierce competition for limited properties on the market and ultra-low mortgage rates superheated the housing market the last couple of years, but now it’s cooling as homebuyers face sharply higher home financing costs than a year ago following a rapid rise in mortgage rates.
In April, the weekly average rate on a 30-year fixedrate home loan climbed above 5% for the first time in more than a decade, crimping would-be homeowners’ purchasing power at the outset of the spring homebuying season, traditionally the busiest period for home sales.
Mortgage buyer Freddie Mac reported Thursday that the 30-year rate slipped to 5.25% this week from 5.3% last week. A year ago, the average rate stood at 3%.
Mortgage rates are climbing following a sharp move up in 10-year Treasury yields, reflecting expectations of higher interest rates overall as the Federal Reserve hikes shortterm rates in order to combat the worst inflation in 40 years.
With inflation at a four-decade high, rising mortgage rates, elevated home prices and tight supply of homes for sale, homeownership has become less attainable, especially for first-time buyers.
Higher rates can limit the pool of buyers and cool the rate of home price growth — good news for buyers. But higher rates can also limit affordability.
For now, the housing market continues to favor sellers as buyers vie for a still tight inventory of homes for sale, which has kept pushing up home prices. Even as sales slowed last month, it was common for homes on the market to receive multiple offers.