The price increase marked more than a decade of consecutive year-over-year gains, the longest streak on record.
But with the average rate on a 30-year mortgage surpassing 5% in April, rising home financing costs drove some would-be buyers out of the market.
Existing-home sales, which include single-family homes, townhouses, condos and co-ops, fell 2.4% month-over-month and 5.9% year-over-year. It was the weakest sales activity since June 2020.
“Rising home prices and sharply higher mortgage rates have reduced buyer activity,” said Lawrence Yun, NAR’s chief economist. “It looks like more declines are on the horizon in the coming months, after a significant surge over the past two years. , we may be back to pre-pandemic home sales activity.”
Affordability remains a challenge
While the number of homes available for sale fell in April, buyer demand remained strong, according to NAR’s tracking of lockboxes, Yun said. In April, the typical home sold within 17 days, with 88% selling in a month or less.
“While confidence that now is a good time to buy is waning, the number of households interested in becoming homeowners remains high,” said Danielle Hale, chief economist at Realtor.com. “This is especially true among younger homebuyers, They may be first-time buyers and are struggling to save for a deposit as rents continue to hit record highs.”
Affordability remains a challenge for first-home buyers, who made up just 28% of the market in April. A year ago, they accounted for 31% of the market.
But not only are record-high home prices and rising mortgage rates weighing on homebuyers, but the persistently low supply of homes available for purchase is also weighing on sales.
Inventories rise but remain low
The inventory of homes for sale rose 10% in April from March, but was down 10.4% from a year earlier, NAR data showed.
“Housing supply has started to improve, albeit very slowly,” Yun said.
He noted that the current real estate market is in a rare state. While rising house prices and fewer days on the market indicated a strong housing market, falling sales were a sign of weakness, he said.
“Maybe we’re moving from an intense market to a less intense market where many homes have multiple offers,” he said. “If there is inventory, transactions are still happening, and they’re happening fast. “
Unfortunately, he said, there is a large chunk of potential stockpiles that haven’t been released.
Some homeowners who may have considered selling may decide to stay put, in part because they have refinanced at very low rates over the past two years. “They don’t want to give up ultra-low mortgage rates,” Yun said.
While higher rates are expected to eventually curb price increases, homeowners still hold most of the cards.
“Sellers will want to keep up with a rapidly adjusting market that is ready to reset,” Hale said.