Sales of previously owned homes in April demonstrated a slight increase, rising by a mere 0.2% month over month to reach 4.02 million units on a seasonally adjusted, annualized basis. This figure, released by the National Association of Realtors (NAR), fell short of the expectations of housing analysts, who had anticipated a more robust gain exceeding 3%. On a year-over-year basis, April sales remained unchanged.
The performance of home sales is closely tied to mortgage rates, which saw a significant uptick in April. The average rate for a 30-year fixed mortgage, which was in the high 5% range at the close of March, experienced a sharp ascent during April. This increase was attributed, in part, to geopolitical events, including the commencement of the U.S.-Israel war with Iran.
Despite a landscape of mixed macroeconomic signals, such as a record-high stock market and historically low consumer confidence, home sales received a modest boost. According to Lawrence Yun, NAR's chief economist, this was driven by continued improvements in housing affordability. He noted that mortgage rates were lower compared to the previous year, and average income growth was outpacing home price appreciation.
Housing inventory saw an increase in April, rising by 5.8% from March. However, when compared to the same month in the prior year, the inventory was up by only 1.4%. This resulted in a total supply of 4.4 months, which is still considered tight. A balanced market, where supply and demand are in equilibrium, is typically represented by a six-month supply.
Yun emphasized the need for substantial growth in inventory, stating, "We really need to see 30% growth in inventory, but we are not seeing that." He further elaborated that while multiple offers on properties are still occurring, they are not as intense as in previous years. Concurrently, the average time homes spend on the market is lengthening, suggesting that potential buyers are taking more time to make purchasing decisions.
This dynamic of limited supply and cautious buyers contributed to an increase in home prices. The median price of a home sold in April reached $417,700, marking a 0.9% increase from the previous year. This figure represents the highest median price recorded by NAR for the month of April.
The average number of days a home remained on the market before being sold also increased. In April, homes took an average of 32 days to sell, up from 29 days during the same period last year. This extended selling period reflects the current market conditions.
First-time homebuyers constituted 33% of all sales in April, a slight decrease compared to the previous year. All-cash sales accounted for one-quarter of the transactions, a share that remained unchanged from the year prior. These statistics provide insight into the composition of the buyer pool.
Looking ahead, mortgage rates have continued to trend higher, starting the current week at 6.42%. Recent reports indicate that while pending home sales have shown some improvement in April and May, the supply of available homes is tightening once again. This ongoing supply constraint is expected to exert upward pressure on home prices in the coming months.
