US home sales fell in April for the second month in a row and home prices had the biggest drop since 2012, according to a National Association of Realtors report released Thursday.
Sales had shown some life, rising in February after a full year of declines due to surging mortgage rates, but that momentum has since cooled.
In April, sales of existing homes — which include single-family homes, townhomes, condominiums and co-ops — dropped 3.4% from March. Annually, sales were down 23% from a year ago and the seasonally adjusted annualized sales pace dropped from 5.57 million units a year ago to 4.28 million in April.
April’s falling sales showed that February’s reversal — which ended the longest streak of month-to-month declining home sales on record, going back to 1999 for all homes — did not take off. Mortgage rates were rising in February and pushing toward 7% in March when many of these April closings went into contract.
“Home sales are bouncing back and forth but remain above recent cyclical lows,” said Lawrence Yun, NAR’s chief economist. “The combination of job gains, limited inventory and fluctuating mortgage rates over the last several months have created an environment of push-pull housing demand.”
This sales pace is higher than the end of last year, when sales hit a low for this cycle of 4 million units. But the current sales pace is down 33% from the cyclical peak of a 6.34 million unit pace in January 2022.
While all four major regions of the US registered both monthly and annual drops in sales, drops continue to be bigger in areas that are highest cost and saw the biggest run up in prices over the past few years.
Sales in the Northeast and the Midwest were both down 1.9% from March, while sales in the South decreased 3.4% and sales in the West were down 6.1% from the previous month. On an annual basis, sales in the West are down a whopping 31%.
In a bit of good news for potential buyers, home prices continue to drop — slightly. The median existing-home price for all housing types in April was $388,800, down 1.7% from April 2022. That’s the biggest drop in home prices since January 2012.
But prices and the competition for homes is uneven across the US.
“Roughly half of the country is experiencing price gains,” Yun said. “Even in markets with lower prices, primarily the expensive West region, multiple-offer situations have returned in the spring buying season following the calmer winter market. Distressed and forced property sales are virtually nonexistent.”
Prices rose in the Northeast and Midwest but retreated in the South and West. Median prices in the Northeast were up 2.8% in April from a year ago to $422,700 and were up 1.8% to $287,300 in the Midwest. In the South prices were down 0.6% to $357,900 and in the West prices have fallen 8% from a year ago to $578,200.
“Price declines are happening in areas where there are an outflow of people, where they saw a strong run up in prices and now they are giving up some of the huge gains they have experienced,” said Yun.
Low inventory remains a challenge
Spring is the most popular time of the year to sell a home, and inventory of homes to buy at the end of April was seasonally up, rising 7.2% from March to 1.04 million units.
But today’s inventory of homes that aren’t new construction is 44% below the 1.8 million units available in April 2019, prior to the pandemic.
While higher mortgage rates is stopping some buyers from getting into the market, low inventory of homes to buy is also hindering sales, said Yun. And the two are related.
Many current homeowners have mortgage rates that are several percentage points lower than the current average mortgage rate of 6.35% and are unwilling to part with it to buy another home.
“Fresh listings aren’t coming,” said Yun, adding that on a week-to-week basis there are fewer new listings coming to market than historical norms.
The US market remains relatively swift, with properties typically remaining on the market for 22 days in April, down from 29 days in March, but up from 17 days in April 2022. The majority of homes, 73%, were on the market for less than a month in April.
Demand is still strong especially when there are so few options to choose from, Yun said, with some homes selling above the listing price in a bidding war.
“Sales are down, prices are even down,” said Yun. “But multiple offers are being seen in one-third of the homes sold.”