February showed promise for the spring housing market. Existing home sales increased, mortgage rates dropped below 6% for the first time in years and home prices weren’t rising as fast as they had been.
But that all fell by the wayside in March.
Data released by the National Association of Realtors show that in March, existing home sales fell by 3.6% month-over-month, and 1% year-over-year to 3.98 million nationally.
That was the slowest pace of March home sales since 2009, the NAR said. It is also the slowest pace in the last nine months.
Regionally, the Northeast had the lowest percentage of existing home sales, at 11%. The South recorded the highest, at 47%, while the West and Midwest sat at 19% and 23%, respectively.
Pending home sales nationwide increased by 1.5% month-over-month in March, but they declined 1.1% year-over-year, the NAR said.
“It continues to be a really difficult housing market for home buyers, and we continue to see a lot of stagnation,” said Kate Wood, senior writer and lending expert at NerdWallet. “Because of current events in March, like the conflict in Iran, that’s something that injected a lot of uncertainty into people’s outlooks.”
The median home price also rose to a new record high for the month of March, reaching $408,800 nationally.
Wood said basic economics would suggest that rising interest rates would force sellers to back down on home prices, as there’s less demand due to a lack of affordability. But that isn’t happening because of the market’s large inventory shortage.
And it is likely a result of the lock-in effect, where homeowners with low mortgage rates aren’t selling their homes. Even if someone wants to make a lateral move rather than upgrade, Wood said, it would be much harder to do so while keeping their budget the same.
Data from 2024 from the Federal Housing Finance Agency estimated that for every percentage point that the current interest rates exceed a homeowner’s interest rate, the probability of their listing their home for sale decreases by 18.1%.
It means that if a homeowner has a 3% interest rate, compared with a current interest rate of 6%, they are almost 60% less likely to put their home up for sale.
“We’re in a situation where homeowners, particularly those who have especially low rates, are doubly advantaged. They have low mortgage interest rates and bought their home at a lower price,” Wood said. “At the same time, people who are trying to buy in today’s market are now, in some sense, double disadvantaged because mortgage interest rates are significantly higher and because homes are at a much higher price point.”
If you’re a first-time buyer looking to compete for a home in this difficult market, Wood suggests that you work with knowledgeable professionals who can properly guide you through the process.
She also recommended being strategic about what you’re asking sellers for, and determining whether there’s anything the seller is prioritizing that you can deliver on, such as a quick closing.
You should also make sure your finances are ready to go. Wood said that includes already having a mortgage preapproval when you start shopping and having all of your financial paperwork together.
Story by Maddie McGay, NorthJersey.com via Reuters Connect