U.S. Existing Home Sales Plunge 2% Year-Over-Year Amid High Rates

In April, the U.S. saw a significant decline in existing home sales, reaching the lowest level since 2009 for the same period. This downturn comes amidst high interest rates and waning consumer confidence, which have continued to dampen the housing market this spring.

The National Association of Realtors (NAR) reported that the seasonally adjusted annual rate of existing home sales in April was 4 million units, a 0.5% decrease from March. This figure marks the lowest point since 2009 for the same month. Compared to April of the previous year, sales dropped by 2%, contrary to economists' expectations of a 2.7% increase.

The data is based on completed transactions, indicating that contracts were likely signed in February or March, before mortgage rates began to rise in April. NAR's Chief Economist, Lawrence Yun, noted that while the housing market has maintained sales at around 75% of pre-pandemic levels over the past three years, despite the addition of 700 million jobs, pent-up demand has not been fully released. Any significant drop in mortgage rates could reactivate this suppressed demand.

Inventory levels surged by 9% month-over-month and 21% year-over-year. By the end of April, there were 1.45 million homes available for sale, representing a 4.4-month supply at the current sales pace. This is the highest level in five years but still below the six-month supply that indicates a balanced market (compared to 3.5 months a year ago).

The increase in supply has started to curb price growth. The median existing-home price in April was 414,000 dollars, up 1.8% from the previous year. While this is a record high for the month, the growth rate is the lowest since July 2023 (when the year-over-year increase was significantly higher). Prices in the South and West regions have started to decline.

Yun commented, "From a macro perspective, we are still in a mild seller's market. However, with inventory reaching a near five-year high, buyers have more negotiating power." The average time a home spent on the market was 29 days, shorter than in March but longer than the same period last year. First-time buyers accounted for 34% of sales, similar to last year.

The contract cancellation rate continued to rise, reaching 7% of transactions in April (compared to the recent average of 3-4%). The high-end market showed relative strength, with sales of homes priced above 1 million dollars increasing by nearly 6% year-over-year, while the 100,000 to 250,000 dollar range saw a decline of over 4%.

Yun emphasized that the growth in the high-end market is narrowing, partly due to stock market volatility. The overall trend suggests that while the housing market remains challenging, there are signs of stabilization and potential shifts in buyer behavior as inventory levels rise and price growth slows.