Thanks to rising mortgage rates and higher home prices, existing home sales fell in April for the third consecutive month. The seasonally adjusted sales rate for existing homes fell 2.4% to 5.61 million from March, according to a report from the National Association of Realtors released Thursday.
That sales pace is down 5.9% compared to a year ago.
Despite the already significant drop, NAR chief economist Lawrence Yun said it’s just the beginning.
“It looks like more declines are imminent in the upcoming months, and we’ll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years,” Yun said in a statement.
Thanks to the slowing sales pace, the inventory of unsold existing homes climbed to 1.03 million, or the equivalent of 2.2 months of supply at its current pace, up from 1.9 months in March and down slightly from the 2.3-month supply seen a year ago.
“Inventory is a key component of housing market conditions, and the limited availability of homes for sale has been adding to upward pressure on prices, delaying some purchase activity,” Joel Kan, the Mortgage Bankers Association‘s associate vice president of economic and industry forecasting, said in a statement. “While there was a slight increase in the number of homes for sale to just over 1 million units, this was likely due to the declining sales pace as demand slows. At just over a two-month supply, inventory is still extremely low by historical standards, and the recent slowdown in residential construction activity may prolong this shortage.”
While the median existing home sales price continued to show year-over-year increases in April reaching $391,200, marking 122 consecutive months of increases, the 14.8% price gain was lower than the 15% increase recorded a month prior.
Those higher prices, combined with rising mortgage rates, make conditions especially challenging for first-time homebuyers. In April, first-time buyers made up 28% of all sales, down from 30% in March and 31% a year ago. Although mortgage rates don’t affect cash buyers, the share of cash buyers dropped from 28% in March to 26% in April. In addition, the share of individual investors and second-home buyers, also decreased from 18% in March to 17% in April.
However, homes still continue to sell quickly. Properties typically remained on the market for 17 days in April, the same as in March 2022 and April 2021; 88% of homes sold in April were on the market for less than a month.
Regionally, existing home sales rose month over month in the Northeast (1.5%) and the Midwest (3.1%) but fell in the South (4.6%) and the West (5.8%). Compared to a year ago, every region saw a decrease in existing home sales, with the Northeast seeing the largest decrease at 10.7%.