Home prices are collapsing, experiencing their biggest drop in 11 years — at an average cost of $388,000 — as high mortgage rates and limited supply make buying today unrealistic for many Americans
- Existing home sales in April fell 3.4% from the previous month to a seasonally adjusted annualized rate of 4.28 million, according to the National Association of Realtors
- The average price for existing homes in April fell 1.7 percent year-on-year to $388,800, the largest year-on-year price decline since January 2012
- Existing home sales have fallen by around a third since early 2022 as rising mortgage rates have made it unaffordable for many to buy
Home prices have fallen to their lowest level in more than 11 years as soaring mortgage rates deal a blow to the American Dream.
Existing home sales — the bulk of the market — fell 3.4 percent from the previous month in April to a seasonally adjusted annualized rate of 4.28 million, the National Association of Realtors said Thursday. In April, sales fell by more than a fifth compared to the previous year.
The average price for existing homes in April fell 1.7 percent year-on-year to $388,800. Nonetheless, markets in the Northeast and Midwest saw price increases.
Existing home sales have fallen by around a third since early 2022 as rising mortgage rates have made it unaffordable for many to buy. Meanwhile, the brutal hikes are crushing the supply of housing as existing owners are reluctant to deviate from interest rates tied to low interest rates.
The housing market was hit hardest by the Federal Reserve’s fastest monetary tightening campaign since the 1980s, after loose fiscal policy under Joe Biden flooded the economy with cash.
Existing home sales — the bulk of the market — fell 3.4 percent from the previous month in April to a seasonally adjusted annualized rate of 4.28 million, the National Association of Realtors said Thursday
The average interest rate on a 30-year home loan has declined slightly over most of the past few weeks, standing at around 6.3 percent since early March. But that’s still 1.5 percent more than a year ago.
When mortgage rates rise, it can add hundreds of dollars a month to homebuyers a month on top of already high home prices.
Elevated interest rates and the stubbornly low inventory of homes on the market have sidelined many potential homebuyers over the past year, resulting in a lackluster start to the spring homebuying season.
In the first four months of 2023, existing home sales are about 27 percent below the pace in the same period last year. Sales are down 33 percent from their last peak in January 2022.
The lack of homes for sale has kept the market competitive, leading to bidding wars in many markets, particularly for the cheapest homes.
In all, there were 1.04 million homes on the market by the end of April, up 7.2 percent from the previous month and up 1 percent from April last year, the NAR said.
At the pace of sales in April, it would take 2.9 months to clear the current inventory of existing homes, up from 2.2 months a year ago. A four to seven month supply is considered a healthy balance between supply and demand.
The market is further constrained by the shortage of transformers and other building materials, which has significantly slowed the pace of new home completions. Tightening credit conditions could also make it more difficult for builders to finance new projects.
Properties typically stayed on the market for 22 days in April versus 29 days in March. 73 percent of homes sold last month have been on the market for less than a month. First-time buyers accounted for 29 percent of sales, up from 28 percent a year earlier.
Cash sales accounted for 28 percent of transactions, compared to 26 percent a year earlier. Distress sales, including foreclosures, accounted for just 1 percent of transactions, flat from March and a year earlier.