Existing home sales drop as prices hit new record

Experts forecast low housing supply through 2024

Macro Trends Advisors founding partner Mitch Roschelle discusses the housing market amid rising inflation and home builders starting to favor selling to investors.

Existing home sales fell by 2.7% in March as demand slowed while prices climbed to a new record.

The latest data from the National Association of Realtors shows 5.77 million previously occupied homes sold last month, which is the lowest seasonally adjusted annual rate since June 2020. Existing home sales have fallen in three of the last four months.

A for sale sign is posted in front of a home for sale on March 18, 2022 in San Rafael, California.  (Photo by Justin Sullivan/Getty Images / Getty Images)

Year over year, the median price of existing homes soared 15% to $375,300 in March, the highest on record. This marks 121 months of year-over-year price increases, the longest stretch on record.

IS THE U.S. ALREADY IN A HOUSING BUBBLE?

"The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power," said Lawrence Yun, NAR's chief economist. "Still, homes are selling rapidly, and home price gains remain in the double-digits."

Waning demand also resulted in an increase in inventory, leaving 950,000 unsold homes on the market by the end of the month. That's up 11.8% from February and down 9.5% from a year ago.

A “Sale Pending” sign outside a house in Discovery Bay, California, U.S., on Thursday, March 31, 2022.  (Photographer: David Paul Morris/Bloomberg via Getty Images / Getty Images)

"Home prices have consistently moved upward as supply remains tight," Yun said. "However, sellers should not expect the easy-profit gains and should look for multiple offers to fade as demand continues to subside."

HOMEBUILDER CONFIDENCE FALLS FOR FOURTH STRAIGHT MONTH

First-time homebuyers accounted for 30% of home sales in March, up a percentage point from the month before. According to Yun, "It appears first-time homebuyers are still looking to lock in at current mortgage rates before they inevitably increase."

A broken “For Sale” sign is seen outside a home in the Queens borough of New York (REUTERS/Shannon Stapleton / Reuters Photos)

The average rate for a 30-year fixed-rate mortgage was 4.17% last month. Now, the average rate is at 5% and expected to climb as the Federal Reserve has signaled it will make further interest rate increases in 2022 after raising them a quarter percent in March to combat soaring inflation, which is at a 40-year-high. 

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Amid the rising interest rates, there was also a higher share of cash sales in March, making up 28% of transactions – the highest since 2014. That is up from 25% in February and 23% from a year ago.

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