House “sold” sign Peoria, Illinois
Daniel Acker | Bloomberg | Getty Images
Existing home sales in March fell 2.7% to a seasonally adjusted annualized rate of 5.77 million units, according to the National Association of Realtors. February’s reading was also revised down, with a bigger dip than usual, from 6.02 million units to 5.93 million.
March sales were 4.5% lower than the same period in 2021.
The reading is deal based, meaning the deals were likely signed in January and February, when mortgage rates were starting to rise, but had not yet risen as much as in March. According to Mortgage News Daily, the average interest rate on the 30-year fixed-rate mortgage was 3.29% in early January and rose to 3.9% by the end of February. The 30-year fixed rate is now 5.35%.
Higher interest rates exacerbated an already expensive market for buyers. The median price of an existing home sold in March was $375,300, up 15% from March 2021. This is the highest median price ever recorded by realtors.
With interest rates rising and prices significantly higher, the average borrower is now paying about 38% more on the monthly payment than they were paying for the same home a year ago, according to Realtor.com.
Prices continue to rise because the supply of homes for sale is still incredibly low despite strong demand from millennials. At the end of March, 950,000 homes were for sale, down 9.5% year-on-year. At the current pace of sales, that’s the equivalent of two months’ supply.
The supply of homes for sale is worst at the bottom end of the market, skewing sales toward the more expensive end.
Sales of homes priced between $100,000 and $250,000 were down 21% year over year, while sales of homes priced between $750,000 and $1 million were up 30%. Homes priced over $1 million saw sales jump 25%.
“We know that homebuilders have been underproducing since the foreclosure crisis, which is why we have this shortage,” said Lawrence Yun, chief economist for the National Association of Realtors. “But when mortgage rates go up, we’ve seen inventories rise for several months.”
Homes for sale are moving fast with average days on the market being just 17 days, down from 18 days a year earlier. And cash is king. It accounted for 28% of all sales in March, the highest since July 2014.
Newer weekly real estate data from Realtor.com suggests supply could rise due to a surge in new listings.
“Good news for buyers as we are typically at the best time of year to have a home for sale,” said Danielle Hale, chief economist at Realtor.com, in a press release. “Combined with the moderation in home sales, this should mean a greater number of options when looking for remaining homes.”