Existing home sales lag, but we may be seeing slight glimmers of hope.
Existing home sales lag, but we may be seeing slight glimmers of hope.
Although existing home sales fell for the third month in a row in April, there are signs that the market may be loosening up. The common restrictions over the last months to years (low inventory, rapidly rising home prices) lost a bit of their grip on the market.
According to the National Association of Realtors® (NAR), April existing home sale came out to a seasonally adjusted annual rate of 5.61 million. Those sales numbers are down 2.4% from March, and 5.9% lower than a year ago. However, two of the four regions saw slight increases in sales activity.
- Northeast: up 1.5%—10.7% lower than last year
- Midwest: up 3.1%—1.5% lower than last year
- South: down 4.6%—5.7% lower than last year
- West: down 5.8%—8.1% lower than last year
"Higher home prices and sharply higher mortgage rates have reduced buyer activity," said Lawrence Yun, NAR's chief economist. "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."
Good news for inventory
There are reasons to be cautiously optimistic about the stubborn problem of not enough homes for sale. Total housing inventory in April reached 1,030,000 units, up 10.8% from March. That number is down 10.4% from a year ago, however, suggesting that inventory is still slowly moving upward. Yun notes, "Housing supply has started to improve, albeit at an extremely sluggish pace."
In addition, the rate of increase of median existing-home sales prices seem to be starting to slow down slightly, year-over-year, moving up at 14.8% in April to $391,200. In March, existing-home prices rose at 15.1%. This is something to keep an eye on, as rising rates, higher supply and lower demand play out over the months ahead.
It all makes for a unique, and somewhat confusing, marketplace. "The market is quite unusual as sales are coming down, but listed homes are still selling swiftly, and home prices are much higher than a year ago," said Yun.
Median average home price, by region:
- Northeast: $412,100—up 8.1% from last year
- Midwest: $282,000—up 8.7% from last year
- South: $352,100—up 22.2% from last year
- West: $523,000—up 4.3% from last year
Opportunities for ARMs
The current, unsettled state of the market, paired with mortgage rates that have risen about 2 percentage points over the last year, makes this an opportunity for different types of loan products. Adjustable rate mortgages (ARMs) have seen a surge in popularity recently.
Yun points out that “an increasing number of buyers with short tenure expectations could opt for 5-year adjustable-rate mortgages, thereby assuring fixed payments over five years because of the rate reset."
Source: https://www.nar.realtor/newsroom/existing-home-sales-retract-2-4-in-april