Mortgage Rates Curtail Home Sales, Yet Prices Surge

Existing-home sales fell last month as mortgage rates eclipsed 7% and home prices continued to rise. But some market segments are showing resilience: High-end home sales—listings at $1 million and above—posted significant gains in April, increasing 40% compared to a year ago, according to the National Association of REALTORS® latest housing report. The share of first-time home buyers also is rising.

Still, higher mortgage rates are likely the prime culprit for causing a slower spring market. NAR’s existing-home sales index, which reflects completed transactions for single-family homes, townhomes, condos and co-ops, shows sales fell nearly 2% in April compared to March and are down by about 2% from a year ago. All four major regions of the U.S. saw a decline in home sales last month.

“Home sales changed little overall, but the upper-end market is experiencing a sizable gain due to more supply coming onto the market,” says NAR Chief Economist Lawrence Yun. The market for homes priced at $1 million or more saw listings jump 34% in April compared to a year ago, and buyers responded to the greater housing choices.

High-end home sales likely were behind the rise in the media price for an existing home, which climbed to $407,600—the highest price on record for the month of April. That’s nearly 6% higher than a year ago.

“Home prices reaching a record high for the month of April is very good news for homeowners,” Yun says. “However, the pace of price increases should taper off since more housing inventory is becoming available.”

More homeowners are listing this spring, with inventory of unsold existing homes climbing 9% in April compared to March. National housing inventory is at about a 3.5-month supply at the current monthly sales pace, which is still considered a brisk selling market.

Homes continue to sell quickly, with properties typically remaining on the market for 26 days in April, down from 33 days in March, according to NAR’s report.

First-Time Buyers Find Their Way

Higher home prices and mortgage rates didn’t appear to deter first-time home buyers, who have emerged in greater numbers this spring. First-timers comprised 33% of home sales last month, up from 29% a year ago, NAR reports.

Consumer surveys are showing that aspiring first-time home buyers feel optimistic about the 2024 housing market, even amid their concerns around affordability and mortgage rates. Nearly three in four Americans who plan to buy their first home say they feel upbeat about the housing market and their personal financial situation, according to TD Bank’s First-Time Homebuyer Pulse survey.

“Down payments have remained an obstacle to the wealth vehicle of homeownership, but there are tools to alleviate some of the burdensome upfront costs,” says Steve Kaminski, head of U.S. residential lending at TD Bank. “Educating first-time home buyers about the resources down payment assistance programs can provide, as well as the associated monthly costs of homeownership, can help them accomplish their dream of owning a home and strengthen their financial position over the long-term.”

Competition Remains High

Home buyers who require mortgage financing aren’t just facing higher rates but also increased competition from cash buyers. Cash sales continue to account for a sizable share of the market, comprising 28% of transactions in April, NAR reports.

Individual investors and second-home buyers tend to make up the biggest bulk of all-cash sales; they purchased 16% of homes in April.

Regional Breakdown

Here’s a closer look at how existing-home sales fared across the country in April, according to NAR’s report:

  • Northeast: Sales fell 4% from March, reaching an annual rate of 480,000. That represents a decrease of 4% from a year ago. Median price: $458,500, up 8.5% from April 2023.
  • Midwest: Sales dropped 1% compared to a month ago, reaching an annual rate of 1 million. Sales also are down 1% from one year ago. Median price: $303,600, up 6% from April 2023.
  • South: Sales decreased 1.6% from March, settling in at an annual rate of 1.9 million. Sales are down 3.1% from the prior year. Median price: $366,200, up 3.7% from last year.
  • West: Sales fell 2.6% from a month ago, reaching an annual rate of 760,000 in April. However, sales posted a 1.3% increase from a year ago. Median price: $629,600, up 9.3% from April 2023.

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