Home Sales Haven’t Been This Slow Since the Great Recession

Existing home sales unexpectedly fell 0.5% in April to a seasonally adjusted rate of 4 million, the slowest pace for April since 2009, as tariff-related uncertainty and wavering consumer confidence overshadowed the spring housing market. While inventory increased 9% from March and 20.8% year-over-year, providing buyers with more options, the median home price continued its upward trend, rising 1.8% year-over-year to $414,000, marking the 22nd consecutive month of increases. With mortgage rates hovering around 6.86% and expected to remain elevated, the outlook for a significant boost in home sales remains uncertain.

Analysis

Existing home sales unexpectedly declined by 0.5% in April to a seasonally adjusted annual rate of 4 million units, marking the slowest April pace since 2009 and a 2% decrease compared to the same month last year. This downturn is attributed to tariff-related uncertainty stemming from an April 2nd announcement and pre-existing wavering consumer confidence regarding personal finances and job security, which overshadowed the key spring housing season. These sales likely went under contract in March and early April when mortgage rates were marginally lower, between 6.6% and 6.7%. Subsequently, mortgage rates have trended higher, with the average 30-year fixed rate reaching approximately 6.86% by May 22, exacerbating affordability concerns for prospective buyers. Despite the sales slowdown, housing inventory increased significantly, rising 9% from March and 20.8% year-over-year to 1.45 million units in April, the highest level in nearly five years. This surge in supply could provide buyers with more options and negotiating leverage. Nevertheless, the national median existing home price continued its ascent, increasing 1.8% year-over-year to $414,000, an all-time high for April and the 22nd consecutive month of year-over-year price gains, although regional variations were observed with price declines in the South and West, and increases in the Northeast and Midwest. The National Association of Realtors' Chief Economist characterized the market as a 'mild seller’s market' but acknowledged that rising inventory improves conditions for buyers, while mortgage rates are anticipated to continue weighing on sales in the near term.

Key Decisions for Investors

• Investors should maintain a cautious outlook on the housing market's near-term transaction volume, given the unexpected 0.5% drop in April existing home sales and persistent affordability challenges posed by mortgage rates around 6.86%.
• The significant 20.8% year-over-year increase in housing inventory to 1.45 million units may present selective buying opportunities and could exert downward pressure on price appreciation in certain markets, despite the national median price reaching a new April high.
• Monitor trends in mortgage rates and consumer sentiment closely, as these factors are expected to be key determinants of housing demand and market stability in the coming months.