Existing home sales fell for the second consecutive month in March, dropping 2.7% month over month to a seasonally adjusted annual rate of 5.77 million, according to a report from the National Association of Realtors released Wednesday.
This sales pace is down 4.5% compared to a year ago.
Experts blame this decrease on low inventory, rising mortgage rates and continued home price increases.
“The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power,” Lawrence Yun, NAR’s chief economist, said in a statement. “Still, homes are selling rapidly, and home price gains remain in the double-digits.”
With mortgage rates expected to continue to rise, Yun predicts transactions will contract 10% this year.
As mortgage rates rose in March, the share of all-cash sales increased to 28% of transactions up from 25% in February and 23% a year prior.
“With rising mortgage rates, cash sales made up a larger fraction of transactions, climbing to the highest share since 2014,” Yun said in a statement.
Despite rising mortgage rates, the median existing-home sales price saw a 15% year over year increase rising to $375,500. This marks the 121st consecutive month of year over year home sales price increases, the longest running streak on record.
“Home prices reached a record high in March, while mortgage rates were skyrocketing,” Holden. Lewis, a home and mortgage expert at NerdWallet, said in a statement. “With the typical home selling for more than $375,000, it’s little wonder that the pace of home sales slowed down, because buyers are facing affordability problems.”
The slower sales pace in March also resulted in the inventory of unsold existing homes increasing 11.8% from February to 950,000, which represents a two month supply at the current sales pace. Despite this increase, inventory is still down 9.5% compared to a year ago.
“Home prices have consistently moved upward as supply remains tight,” Yun said in a statement. “However, sellers should not expect the easy-profit gains and should look for multiple offers to fade as demand continues to subside.”
While inventory increased and the sales pace decreased in March, the number of days a property typically remained on the market dropped to 17 from 18 in February. Overall, 87% of homes sold during March were on the market for less than a month.
Regionally, existing home sales recorded month-over-month decreases in three of the four major U.S. regions with the Midwest seeing the largest drop at 4.5%, followed by the South at 3.0%, and the Northeast at 2.9% Existing-home sales in the West held steady from the prior month. Compared to a year ago, every region saw a decrease in existing home sales, with the Northeast seeing the largest decrease at 11.8%.