High mortgage rates and prices cool April home sales during peak spring season

Sales of previously owned homes in the U.S. went down in April, as high mortgage rates and increasing prices made many buyers hesitate during what is usually the busiest time of year for home buying.

The National Association of Realtors said Thursday that home sales dropped by 0.5% from March, bringing the adjusted annual rate to 4 million units. This is the slowest pace for April since 2009, just after the housing crisis. March had already recorded the weakest sales for that month since 2009.

Compared to April last year, sales were down 2%. The number was slightly below what economists expected, which was around 4.10 million, according to FactSet.

Home prices kept going up year over year for the 22nd straight month, although the increase was smaller than in previous months. The median home price in April was \$414,000, up 1.8% from the year before and the highest ever for the month.

“The affordability condition is clearly hurting the market, particularly higher mortgage rates,” said Lawrence Yun, chief economist at NAR.

Since 2022, when mortgage rates began to rise from record lows during the pandemic, home sales have dropped to about 75% of what they were before. Last year saw the lowest home sales in nearly three decades.

The average rate on a 30-year mortgage has stayed near its highest point this year, just above 7%, which it hit in mid-January, according to Freddie Mac. The lowest rate seen this year was five weeks ago at 6.62%. This week, it reached 6.86%, the highest since mid-February.

Most homes sold last month likely went under contract in March and April, when mortgage rates ranged from 6.62% to 6.83%.

High mortgage rates add hundreds of dollars a month to payments, keeping many people from buying a home they can afford.

Because of rising prices over the years, many Americans now find it too expensive to buy a home. The median home price has gone up 53% over the last six years.

Buyers who can afford to purchase homes at current rates are seeing more options. At the end of April, 1.45 million homes were on the market. That’s a 9% increase from March and 20.8% more than in April last year. It’s the most homes for sale since September 2020 but still fewer than the 2 million homes that were typically available before the pandemic.

At the current pace, the market now has a 4.4-month supply of homes, up from 3.5 months a year ago. A 5- to 6-month supply is usually considered a good balance between buyers and sellers.

One reason for more homes on the market is that they are taking longer to sell. Last month, homes stayed on the market for 29 days on average, compared to 26 days in April last year.

The larger selection may have helped first-time buyers. They made up 34% of home purchases last month, the highest since July 2020, but still below the usual 40%.

Buyers paying entirely in cash made up 25% of purchases last month, down from 28% a year earlier. Investors, many of whom buy with cash, accounted for 15% of sales, slightly down from 16% last year, NAR said.