As buyer demand waned amid rising interest rates and inflation, existing-home sales declined in March 2022 for the second consecutive month, the National Association of Realtors (NAR) reported on Wednesday.
Total existing-home sales dropped by 2.7 percent from February 2022 and by 4.5 percent from March 2021 to a seasonally adjusted annual rate of 5.77 million.
On a monthly basis, sales waned in three out of the four major U.S. regions (they remained the same in the West). Year over year, existing-home sales were down in every region.
“The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power,” NAR’s chief economist, Lawrence Yun, said in a statement. “Still, homes are selling rapidly, and home price gains remain in the double-digits.”
Since mortgage rates are expected to increase even further, Yun said he anticipates transactions will decline by 10 percent this year, home prices will readjust and gains will grow by about 5 percent.
As demand tapered, inventory made gains in March, with total inventory up 11.8 percent from the previous month and down 9.5 percent year over year to 950,000 units. There’s a 2.0-month supply of inventory at the current sales pace, up from 1.7 months in February and down from 2.1 months year over year.
The median existing-home sale price was up 15.0 percent year over year, increasing to $375,300 in March 2022 up from $326,300 in March 2021. That continued rise in prices marked the 121st consecutive month of year over year price increases, the longest-ever such streak.
Despite continued rising prices, Yun warned that sellers should not anticipate easy profits moving forward since declining demand is a likely indication of less buyer competition and bidding wars in the near future.
Homes stayed on the market for 17 days in March, which was down from 18 days in February and down from 18 days the year before. The vast majority of homes (87 percent) were on the market for less than a month.
First-time buyers continued to hit the market in March to lock in interest rates, with first-timers making up 30 percent of sales, up from 29 percent in February and down from 32 percent in March 2021.
Individual investors/second-home buyers, who are often responsible for all-cash purchases, bought 18 percent of homes in March, down from 19 percent the month before and up from 15 percent the year before. In total, all-cash sales made up 28 percent of transactions throughout the month, up from 25 percent in February and from 23 percent in March 2021.
“With rising mortgage rates, cash sales made up a larger fraction of transactions, climbing to the highest share since 2014,” Yun explained.
Distressed sales made up less than 1 percent of sales in March, holding steady both month over month and year over year.
The average commitment rate for a 30-year conventional, fixed-rate mortgage, according to Freddie Mac, was 4.17 percent in March, up from 3.76 percent in February. In contrast, the average commitment rate for all of 2021 was 2.96 percent.
Single-family versus condo/co-op
Single-family sales declined 2.7 percent month over month and 3.8 percent year over year to a seasonally adjusted annual rate of 5.13 million in March. The median single-family home price increased 15.2 percent year over year to $382,000.
Meanwhile, existing condo and co-op sales were at a seasonally adjusted annual rate of 640,000 units in March, down 3 percent from February and down 9.9 percent from March 2021. The median existing condo price was $322,000, up 11.9 percent year over year.
Existing-home sales saw the most significant drop in March in the Midwest, where sales decreased 4.5 percent from February to an annual rate of 1,270,000. That rate was also down 3.1 percent year over year. However, the median price in the region surged 10.4 percent year over year to $271,000.
In the South, existing-home sales declined 3.0 percent from the previous month to an annual rate of 2,620,000, which was also down 3.0 percent from March 2021. The median existing-home price skyrocketed 21.2 percent year over year to $339,000, marking the seventh consecutive month in which the South saw the highest regional price appreciation rate.
Northeast existing-home sales declined 2.9 percent in March to an annual rate of 670,000, which was also down 11.8 percent year over year. Meanwhile, the median price rose 6.8 percent year over year to $390,200.
Existing-home sales remained the same in the West from February 2022 to March 2022 at an annual rate of 1,210,000. That figure, however, was down 4.7 percent from the year before. The median price of existing homes rose 5.4 percent year over year to $519,900.