April home sales disappoint as higher mortgage rates weigh on buyers

Key Concepts

• Existing Home Sales: A measure of the number of previously owned homes sold during a given period.
• Seasonally Adjusted Annualized Rate (SAAR): A statistical technique used to adjust for seasonal fluctuations in data to project an annual total.
• Inventory Supply: The number of months it would take to sell the current stock of homes at the current sales pace.
• Median Home Price: The middle price point of all homes sold, representing the market's central tendency.
• Days on Market (DOM): The average time a property stays listed before a contract is signed.
• Cash Sales: Transactions completed without mortgage financing.

---

April Existing Home Sales Performance

The housing market in April showed stagnation, with existing home sales rising by only 0.2% from March to a seasonally adjusted annualized rate of 4.02 million units. This performance significantly underperformed market expectations, which had projected a 3% gain. On a year-over-year basis, sales remained unchanged. It is important to note that these figures are based on closings, meaning the underlying contracts were likely signed during late February and March.

Market Dynamics and Mortgage Rates

The volatility in mortgage rates has been a primary driver of market behavior. The average 30-year fixed mortgage rate concluded March at 5.99% but experienced a sharp increase following the onset of the conflict with Iran. As of the reporting period, mortgage rates have climbed further to 6.42%, creating a challenging environment for prospective buyers.

Inventory and Pricing Trends

Despite the sluggish sales volume, inventory levels saw a modest improvement:

• Inventory Growth: Increased 5.8% from March and 1.4% year-over-year.
• Supply Level: The market currently holds a 4.4-month supply, which remains categorized as "tight."
• Price Pressure: The limited supply continues to exert upward pressure on home values. The median price for an existing home in April reached $417,700—the highest April price on record—representing a 0.9% increase compared to the previous year.

Buyer Demographics and Market Activity

• Days on Market: The average time a home spent on the market increased to 32 days, up from 29 days in April of the previous year.
• First-Time Buyers: This demographic accounted for 33% of total sales, a slight decline from the prior year.
• Cash Transactions: Cash purchases remained steady, accounting for one-quarter (25%) of all sales, consistent with the previous year's data.

Synthesis and Outlook

The housing market is currently characterized by a "tight" supply environment that prevents price corrections despite higher mortgage rates. While recent reports indicate a slight uptick in pending sales over the last two weeks, the tightening of supply suggests that upward pressure on home prices will persist. The combination of record-high April median prices and rising mortgage rates continues to create a restrictive environment for buyers, particularly first-time entrants.