The U.S. housing market experienced a notable slowdown in April, with sales of previously owned homes barely increasing by 0.2% and missing analyst expectations. This muted growth occurred despite a slight uptick in inventory and reflects the impact of higher mortgage rates, which surged in April partly due to heightened geopolitical tensions involving a U.S.-Israel war with Iran. The median home price, however, reached a new April high of $417,700, underscoring persistent demand amidst tight supply.
The American housing market exhibited a near-stagnant performance in April, with sales of pre-owned homes inching up by a mere 0.2% from March. This translated to 4.02 million units on a seasonally adjusted, annualized basis, a figure that fell significantly short of the more than 3% gain anticipated by housing analysts, according to data from the National Association of Realtors (NAR).
Year-over-year, April sales remained flat, reflecting contracts that were predominantly inked in late February and March. A significant factor influencing buyer sentiment was the dramatic increase in mortgage rates. The average rate for a 30-year fixed mortgage, which concluded March in the high 5% range, spiked sharply throughout April. This escalation was notably attributed to the onset of the U.S.-Israel war with Iran, as reported by Mortgage News Daily.
Video: April home sales disappoint as higher mortgage rates weigh on buyers (1:18)
Lawrence Yun, chief economist for the National Association of Realtors (NAR), commented on the intricate market dynamics. "Despite mixed macroeconomic signals—including a record-high stock market and historically low consumer confidence—home sales were modestly boosted by the continued improvement in housing affordability," Yun stated in a press release. He added a note of cautious optimism, highlighting that "Mortgage rates are lower from a year ago, and average income growth is outpacing home price gains," suggesting some underlying strengths despite the monthly slump.
Housing inventory saw a modest increase in April, rising 5.8% from March and 1.4% compared to the previous April, resulting in a 4.4-month supply. This level remains considerably tight, especially when benchmarked against a six-month supply, which typically signifies a balanced market favoring neither buyers nor sellers.
Yun emphasized the need for a substantial increase in available homes. "We really need to see 30% growth in inventory, but we are not seeing that," he noted. Despite the supply constraints, he observed a shift in buyer behavior: "Multiple offers, though not as intense as a few years ago, are still occurring. At the same time, days on market are lengthening on average, implying that consumers are taking their time before making decisions."
The persistent imbalance between supply and demand continued to exert upward pressure on prices. The median price for a home sold in April reached $417,700, marking a 0.9% increase from the prior year and establishing it as the highest April median price ever recorded by NAR.
Further illustrating the evolving market, the average number of days a home remained on the market extended to 32 days in April, an increase from 29 days in April of the previous year. First-time buyers accounted for 33% of sales, a marginal dip from a year ago, while all-cash transactions remained steady at one-quarter of all sales.
Looking ahead, mortgage rates have sustained their elevated levels, commencing this week at 6.42%. Concurrent reports from April and May indicate a modest rise in pending sales, yet supply continues to tighten. This trend is expected to further bolster home prices in the near term.
