Increasing mortgage rates and high inflation are taking a toll on the housing market. In March, existing-home sales decreased for the second month in a row, according to the National Association of Realtors (NAR). Year-over-year sales were down in every sales region in the country, while the West was the only sales region to not record a drop in month-over-month sales. Mortgage rates are expected to climb higher throughout the year; as a result, Lawrence Yun, chief economist for NAR, predicted that sales transactions should contract by 10% this year.
Prices Higher Year over Year
Prices are also expected to readjust throughout the year, which should come as welcome news to buyers. The median existing-home price for all types of housing increased 15% year over year. Every sales region recorded price increases. What’s more, March marks the 121st consecutive month of year-over-year increases, besting last month’s record. The lack of available inventory remains a factor in the price gains. However, “sellers should not expect the easy-profit gains and should look for multiple offers to fade as demand continues to subside,” stated Yun. The average property remained available for just 17 days in March, down from 18 days in both February and March 2021. Of all the homes sold in March 2022, 87% were available for under one month.
More Homes Needed
Although improving, total housing inventory remained low in March; there were 950,000 units available for sale, up 11.8% from February but down 9.5% from March 2021. At the current sales pace, this inventory level would supply the market for only two months, up from 1.7 months in February but down from 2.1 months in March 2021.
All-Cash Sales Climb
“With rising mortgage rates, cash sales made up a larger fraction of transactions, climbing to the highest share since 2014,” according to Yun. All-cash sales represented 28% of all transactions in March, up from 25% in February and 23% in March 2021. First-time buyers accounted for 30% of all transactions in March, up from 29% in February. According to the NAR 2021 “Profile of Home Buyers and Sellers,” the annual share of first-time buyers was 34%. The demand from first-timer buyers could be driven by the desire to lock in at the current mortgage rate before rates go higher. Individual investors and second-home buyers—two groups who account for many all-cash sales—were responsible for 18% of all purchases in March, down from 19% in February but up from 15% in March 2021.
Northeast: Existing-home sales annual rate of 670,000; a decrease of 2.9% from February 2022 and 11.8% from March 2021. At $390,200, the median sales price increased 6.8% from March 2021.
Midwest: Existing-home sales annual rate of 1.27 million; a decrease of 4.5% from February 2022 and 3.1% from March 2021. At $271,000, the median sales price increased 10.4% from March 2021.
South: Existing-home sales annual rate of 2.62 million; a decrease of 3% from February 2022 and 3% from March 2021. At $339,000, the median sales price increased 21.2% from March 2021.
West: Existing-home sales annual rate of 1.21 million; unchanged from February 2022 but a decrease of 4.7% from March 2021. At $519,900, the median sales price increased 5.4% from March 2021.