U.S. home sales experienced their second consecutive monthly decline in April, raising concerns of a potentially prolonged slump in the real estate sector.
According to data from the National Association of Realtors, existing home sales fell by 1.9%, reaching a seasonally adjusted annual rate of 4.14 million units. This follows a similar decline in March.
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Newsweek has reached out to the National Association of Realtors for comment.
The decline has been attributed to several key factors. Rising mortgage rates remain a primary concern, making it more expensive for potential buyers to finance their purchases. The average rate on a 30-year fixed mortgage is currently hovering around seven percent, according to the Mortgage Bankers Association of America. That’s down from a 7.9 percent peak in October 2023, but still higher than it was a year ago.
“Supply constraints are doing as much to hold back sales as demand-side weakness,” said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics told Reuters. He added that existing home sales might continue to tread water or even edge down further over the next few months.
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Additionally, high home prices have deterred many would-be buyers. The median existing-home sales price in April was $407,600, according to the NAR, which is 5.7% higher than a year ago. This price increase has made it more difficult for potential buyers to enter the market, particularly first-time buyers.
Housing inventory increased by 9% in April to 1.21 million units, the NAR said in a report, marking the highest level since October 2021. Despite this increase, supply remains below pre-pandemic levels, contributing to the ongoing challenges in the housing market.
“The rise in inventory was concentrated in homes priced $1 million or more, where supply rose 34% from a year ago,” noted the NAR report. In contrast, houses priced $100,000 and below saw sales declining by 7.1% .
The combination of high prices and rising mortgage rates has created a challenging environment for both buyers and sellers. The market has been navigating a complex landscape over the past year, transitioning from a pandemic-driven boom to a more restrained period characterized by affordability issues. During the pandemic, low mortgage rates and increased demand for larger living spaces drove a sharp rise in home prices, creating affordability issues for many buyers.
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The outlook for the housing market remains uncertain. If mortgage rates continue to rise, there may be a further decline in home sales. Additionally, unless there is a significant increase in housing inventory, prices are unlikely to decrease substantially, maintaining the affordability barrier for many buyers.
Economists do not expect a significant decline in mortgage rates until the Federal Reserve starts cutting interest rates, which is anticipated to begin in September.
Post courtesy of newsweek.com.