In the month of April, sales of previously owned homes experienced a 1.9% drop from March, totaling 4.14 million units. This decrease was unexpected as forecasts had predicted a minor increase in sales for the month. Additionally, when compared to the same period in the previous year, sales were down by the same percentage. These figures are based on closings, suggesting that the signed contracts most likely occurred in February and March. One contributing factor to this decline in sales could be the significant increase in mortgage rates, which saw a rise at the beginning of February and remained around 7% for the following two months before climbing even higher in April.
Lawrence Yun, the chief economist for the National Association of Realtors, highlighted the concerning effect of the substantial increase in mortgage rates on home sales. He stated that the current rates, which are 300 basis points higher than pre-Covid levels, have put the housing market in uncharted territory. Yun emphasized the potential impact of these rates on the “lock-in effect,” which may inhibit home sales in the coming months.
By the end of April, the total housing inventory reached 1.21 million units, marking a 9% increase from the previous month and a 16% rise from the previous year. Despite this growth, the inventory level only represents a 3.5-month supply at the current sales pace, falling short of the balanced six-month supply ideal for both buyers and sellers. Notably, the supply of homes priced above $1 million saw a significant uptick of 34% year over year, driving increased activity in that segment of the market. Conversely, sales of homes priced below $100,000 witnessed a 7.1% decline, while sales of properties exceeding $1 million surged by 40%.
The limited housing supply continued to exert pressure on prices, with the median price of existing homes sold in April reaching $407,600, reflecting a 5.7% increase compared to the previous year. This figure represents another record high price for the month of April. Strong demand led to a notable trend of multiple offers, resulting in 27% of homes being sold above the listing price. While this surge in prices may benefit existing homeowners, Yun emphasized the need for the pace of price increases to slow down as more housing inventory becomes available in the market.
Regionally, sales performance varied across the Northeast, Midwest, South, and West. In the Northeast, sales fell by 4% from March and the previous year, with a median price of $458,500 marking an 8.5% year-over-year increase. The Midwest experienced a 1% decline in sales both month-to-month and year-over-year, with a median price of $303,600, up 6% from the previous April. Sales in the South dropped by 1.6% from March and 3.1% from the previous year, with a median price of $366,200 representing a 3.7% annual increase. In the West, sales decreased by 2.6% for the month but rose by 1.3% year over year, with a median price of $629,600, indicating a 9.3% jump from April 2023.
The housing market in April 2023 reflected a mix of challenges and opportunities, driven by factors such as mortgage rate fluctuations, supply shortages, price pressures, and regional sales dynamics. As market conditions continue to evolve, stakeholders will need to closely monitor these trends and adapt their strategies to navigate the changing landscape of the real estate sector.
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