Amid rising rates and strong inflationary concerns, the National Association of Realtors (NAR) reports that existing-home sales in April fell for the third consecutive month to a seasonally adjusted annual rate of 5.61 million, as sales were down 2.4% from March 2022, and down 5.9% year-over-year. NAR defines “total existing-home sales” as completed transactions that include single-family homes, townhomes, condominiums, and co-ops.
"Higher home prices and sharply higher mortgage rates have reduced buyer activity," said Lawrence Yun, NAR's Chief Economist. "It looks like more declines are imminent in the upcoming months, and we'll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years."
Rates have pressed above the 5.0% mark, as Freddie Mac reports in its latest Primary Mortgage Market Survey (PMMS), the 30-year fixed-rate mortgage (FRM) was down to 5.25% week-over-week. And as rates move northward, more and more prospective buyers are waiting for rates to cool before locking in their homes.
And as more buyers wait for things to simmer down, more inventory has hit the market. Slower demand has pushed the inventory of unsold existing homes to 1.03 million at the end of April, up 10.8% from March 2022’s totals, and down 10.4% in April year-over-year (1.15 million). Unsold inventory currently sits at a 2.2-months’ supply at the current sales pace, up from 1.9 months’ supply in March, and down from 2.3 months’ supply in April 2021.
“Inventory is a key component of housing market conditions, and the limited availability of homes for sale has been adding to upward pressure on prices, delaying some purchase activity,” said AVP of Economic and Industry Forecasting for the Mortgage Bankers Association (MBA) Joel Kan. “While there was a slight increase in the number of homes for sale to just over one million units, this was likely due to the declining sales pace as demand slows. At just over a two-month supply, inventory is still extremely low by historical standards, and the recent slowdown in residential construction activity may prolong this shortage.”
As Kan references, the slowdown in residential construction was measured this week by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which found that builder sentiment declined for the fifth straight month, recording its lowest reading since June 2020.
Continuing to rise was the median existing-home sales prices, which rose in April 2022 at a slower year-over-year pace of 14.8% to $391,200, marking 122 consecutive months of year-over-year increases.
Contributing to this rise is the continued rising cost of raw materials and supplies, with latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics (BLS), finding the price of goods used in residential construction climbing 0.5% in April, a 4.9% increase in building materials prices since the start of 2022. Building materials prices were found to be up 19.2% year-over-year in April, and have risen 35.6% since the start of the pandemic.
While the price of softwood lumber fell in April 2022, dipping 15.6% in April, the cost of steel mill products climbed 2.4% in April—the first monthly increase since December 2021, and ready-mix concrete rose 1.3% in April as well.
Regionally, existing-home sales in the Northeast rose 1.5% in April, reaching an annual rate of 670,000, a 10.7% slide from April 2021. The median price in the Northeast was $412,100, up 8.1% from one year ago.
Existing-home sales in the Midwest grew 3.1% from the prior month to an annual rate of 1,310,000 in April, a 1.5% drop from April 2021. The median price in the Midwest was $282,000, an 8.7% increase from one year ago.
Existing-home sales in the South fell 4.6% in April, posting an annual rate of 2,490,000, which represents a decrease of 5.7% from one year ago. The median price in the South was $352,100, a 22.2% climb from one year prior. For the eighth consecutive month, the South recorded the highest pace of price appreciation in comparison to the other three regions. Additionally, the South is the only region to report year-over-year double-digit price gains.
Existing-home sales in the West dipped 5.8% compared to the previous month, registering an annual rate of 1,140,000 in April, down 8.1% from one year ago. The median price in the West was $523,000, up 4.3% from April 2021.
Distressed sales—foreclosures and short sales—represented less than 1% of total home sales in April 2022, equal to the percentage seen in March, and down from 2% year-over-year.
Individual investors or second-home buyers, who make up many cash sales, purchased 17% of the homes available nationwide in April, down from 18% in March, and equal to 17% in April 2021.
“Homeowners considering a sale this year still hold most of the cards, but will want to keep on top of a rapidly-adjusting market poised for a reset—a real estate refresh,” said Realtor.com Chief Economist Danielle Hale. “Realtor.com housing data shows that there were fewer homes actively for sale in April than in the year prior, but by the first week of May, the trend flattened. In the most recent weekly data, we saw the biggest yearly jump in active listings since March 2019, as more homeowners decided to sell and more searchers decided to hit pause. The combination of these trends means home shoppers–at least those who can navigate higher mortgage rates and monthly payments–will have more homes to choose from relative to last year, even as options are fewer than before the pandemic.”