U.S. Existing Home Sales Plunge 5.9% Amid High Rates, Prices

The U.S. housing market faced a significant setback in March, with existing home sales experiencing the largest decline since 2022. This downturn was primarily driven by the dual pressures of high mortgage interest rates and elevated housing prices, which have made homeownership increasingly unaffordable for many prospective buyers.

The National Association of Realtors (NAR) reported that the sales volume of existing homes decreased by 5.9% in March, reaching an annualized rate of 4.02 million units. This figure fell short of the expectations of most economists surveyed. The median price of existing homes rose by 2.7% year-over-year to $403,700, marking the highest level for March in history and continuing the upward trend in prices observed since the beginning of 2023. The outlook for the market remains bleak, as tariff measures could further increase the costs of furniture and building materials, exacerbating the financial strain on consumers.

NAR's Chief Economist, Lawrence Yun, noted that the rise in home prices was largely due to increased sales activity in the high-end market, with homes priced above $1 million. However, he also pointed out that the rate of price increases, while significant, remains moderate compared to wage growth. Despite an increase in the supply of homes, with inventory rising by 19.8% year-over-year to 1.33 million units—the highest level since 2020—the upward trend in prices persists.

The impact of rising interest rates on the housing market is profound. As mortgage rates continue to climb, the cost of borrowing for home purchases increases, making it more challenging for buyers to secure financing. This trend is particularly concerning for first-time homebuyers, who often rely on mortgages to afford their initial property. The rise in interest rates has also affected the resale market, as existing homeowners may be hesitant to sell their properties if they cannot secure a favorable mortgage rate for their next purchase.

In addition to interest rates, housing prices have also played a significant role in the decline of existing home sales. Despite the overall economic recovery, housing prices have remained high, driven by a combination of factors including limited inventory and strong demand. This has made it challenging for buyers to find affordable properties, further contributing to the decrease in sales. The high cost of housing has also led to a shift in buyer preferences, with many opting for more affordable alternatives such as renting or purchasing smaller properties.

The decline in existing home sales has broader implications for the U.S. economy. The housing market is a key driver of economic growth, and a slowdown in this sector can have ripple effects throughout the economy. For example, a decrease in home sales can lead to a reduction in construction activity, as builders may be less inclined to start new projects if demand for housing is weak. This, in turn, can result in job losses and a slowdown in economic growth.

In conclusion, the decline in existing home sales in March underscores the challenges facing the U.S. housing market. Rising interest rates and high housing prices have made homeownership less affordable, leading to a decrease in demand for existing homes. This trend has broader implications for the economy, as the housing market plays a crucial role in driving economic growth. As the market continues to evolve, it will be important for policymakers and industry stakeholders to address these challenges and work towards creating a more sustainable and affordable housing market.