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As mortgage rates rise, some home buyers are starting to back away from the higher costs of ownership. Existing-home sales fell in March, the second consecutive month for declines, the National Association of REALTORS® reported Wednesday. Still, with limited housing stock for sale, homes continue to sell fast and for higher prices.
NAR’s existing-home sales index—which reflects completed transactions for single-family homes, townhomes, condos, and co-ops—fell 2.7% in March compared to February. Sales are down 4.5% compared to a year ago.
“The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power,” says Lawrence Yun, NAR’s chief economist. “Still, homes are selling rapidly, and home price gains remain in the double-digits.”
The 30-year fixed-rate mortgage reached a 5% average last week, the highest for rates in more than a decade, according to Freddie Mac. Since the beginning of the year, mortgage rates have jumped by 1.8 percentage points, which has added about $400 to the average monthly mortgage payment for a median-priced home, according to NAR data.
Mortgage rates are expected to rise further. As a result, Yun predicts that home sales will fall by 10% this year. He also predicts that home prices will readjust and gains by the end of the year will amount to about 5%.
Here’s a closer look at key indicators from NAR’s latest home sales report:
- Home prices: Existing-home prices for all housing types reached a median of $375,300 in March, up 15% compared to a year ago. Prices increased in every major region of the U.S. last month. “Home prices have consistently moved upward as supply remains tight,” Yun says. “However, sellers should not expect the easy-profit gains and should look for multiple offers to fade as demand continues to subside.”
- Days on the market: Eighty-seven percent of homes for sale in March sold in less than a month. Properties typically remained on the market for 17 days in March, down from 18 days in February and March 2021.
- Housing inventory: Total housing inventory at the end of March was 950,000 units, up 11.8% compared to February but still down nearly 10% from a year ago.
- First-time home buyers: First-time buyers comprised 30% of sales in March, down from 32% a year ago. “It appears first-time home buyers are still looking to lock in at current mortgage rates before they inevitably increase,” Yun says.
- Investors and second-home buyers: Individual investors and second-home buyers purchased 18% of homes in March, up from 15% a year ago. Investors and second-home buyers tend to make up the bulk of all-cash sales. All-cash transactions comprised 28% of sales in March--the highest share in about eight years. “With rising mortgage rates, cash sales made up a larger fraction of transactions, climbing to the highest share since 2014,” Yun says.
- Distressed sales: Foreclosures and short sales represented less than 1% of sales in March, remaining at the same low level compared to a year ago.
Regional Breakdown
Three of the four major regions of the U.S. saw March home sales drop, while sales held steady in the West, according to NAR’s report. Year-over-year, however, sales were down across the board. Here’s a closer look at how existing-home sales fared last month by region.
- Northeast: existing-home sales decreased 2.9% in March, reaching an annual rate of 670,000. Sales were down 11.8% compared to a year ago. Median price: $390,200, up 6.8% from March 2021
- Midwest: sales fell 4.5% from the prior month to an annual rate of 1.27 million. That is a 3.1% decrease compared to March 2021. Median price: $271,000—a 10.4% increase compared to a year ago
- South: existing-home sales slipped 3% last month to a 2.62 million annual rate. That is a decrease from 3% a year ago. Median price: $339,000, up 21.2% from one year prior.
- West: sales held steady compared to the previous month and continued at an annual rate of 1.21 million. That is still down from 4.7% a year ago. Median price: $519,900, up 5.4% from March 2021.