The sharpest decline in US existing home sales since 2009 unveils a somber reality amid skyrocketing mortgage rates and a burgeoning inventory.
At a Glance
- Existing home sales dropped to 4.02 million, a 5.9% decrease.
- Economic uncertainty and high mortgage rates deter buyers.
- Inventory levels increased, yet median home prices rose 2.7%.
- All-cash deals accounted for 26% of sales.
Record Drop in Home Sales
Existing home sales in the US plunged to a seasonally adjusted rate of 4.02 million units in March, marking a 5.9% decrease and the slowest pace since the 2009 subprime mortgage crisis. Rising mortgage rates approaching 7% and high home prices have resulted in affordability pressures that deter potential buyers. Economic uncertainty, compounded by inflation, tariffs, and employment concerns, only adds fuel to the already slowing housing market. Contract cancellations are on the rise, further signaling potential vulnerabilities.
The market’s struggle continues with historic lows in existing home sales. Investors and first-time buyers have been notably impacted. First-time buyers made up a mere 32% of transactions, consistent with the previous year but still below the historical average of 40%. The appetite for all-cash deals, which represented 26% of sales, shows that a significant section of the market circumvents traditional mortgages. Cancelled contracts increased as stock market volatility rattled consumer confidence.
The Inventory Conundrum
Despite the apparent cooling demand, housing inventory levels rose 19.8% from last year to 1.33 million units. However, a puzzling trend emerged: the median home price surged by 2.7% to $403,700. Analysts predict a possible downturn, with properties remaining longer on the market—an average of 36 days compared to 33 days a year ago. According to Lawrence Yun, “Home buying and selling remained sluggish in March due to the affordability challenges associated with high mortgage rates.”
“Home buying and selling remained sluggish in March due to the affordability challenges associated with high mortgage rates.” – Lawrence Yun.
Given these rising inventories, the current stock would last about four months—an increase from the 3.2 months a year ago. Distressed sales, including foreclosures, rose to 3% from 2% a year earlier, another grim indicator of economic stress. Lawrence Yun notes, “In stark contrast to the stock and bond markets, household wealth in residential real estate continues to reach new heights,” highlighting the mixed signals from the housing market.
Economic Pressures Intensify
The West region stood out as the only area with a year-over-year sales gain, buoyed by activity in the Rocky Mountain states. Meanwhile, economic pressures are expected to worsen as inflation, high prices, high mortgage rates, and tariffs compound consumer unease over jobs and the economy. Economists like Robert Frick warn, “March numbers are bad, but they’re likely to get worse.” Amid these concerns, new home sales did see a surprising surge in March as builders enticed buyers with incentives.
“March numbers are bad, but they’re likely to get worse.” – Robert Frick.
With every indicator pointing to more pain ahead, policymakers grapple with how to stabilize an uncertain market. Affordability remains a central obstacle, undermining the dreams of prospective homeowners. As mortgage rates and economic uncertainty continue to rise almost in tandem, the housing market awaits aggressive intervention or risk a continued decline. Without a thoughtful overhaul, this sector and the broader economy remain on a collision course.
