Potential buyers attend an open house of a home for sale in Larchmont, New York, USA on Sunday, January 22, 2023.
Tiffany Hagler-Geard | Bloomberg | Getty Images
Sales of previously owned homes fell 4.3% in March from February to a seasonally adjusted annualized rate of 4.19 million units, according to the National Association of Realtors. Turnover was 3.7% lower than in March 2023. This came after a large increase in turnover in February.
Rising mortgage rates are likely the cause of the slowdown.
This number of sales is based on the closings of contracts likely signed in January and February. Mortgage interest rates remained lower in January, around 6% on the popular 30-year fixed loan. Then they shot higher in February.
Regionally, sales fell everywhere except the Northeast, where they rose 4.2% month-on-month. Turnover fell fastest in the West, with a decline of 8.2%. Prices are highest in the West.
“While recovering from cyclical lows, home sales remain stagnant as interest rates have not made any major moves,” Lawrence Yun, NAR's chief economist, said in a news release. “There are now almost six million more jobs compared to pre-coronavirus peaks, suggesting there are more would-be homebuyers in the market.”
Inventory improved slightly, rising 4.7% month over month to 1.11 million homes for sale at the end of March. That's a supply for 3.2 months at the current sales pace. The stock is now up 14.4% from March last year.
However, the increased supply did not cause house prices to fall. The average price of an existing home sold in March was $393,500, up 4.8% from the year before. It is also the highest price ever for the month of March. However, the annual comparison was slightly lower than the previous month.
The spring housing market becomes more competitive and moves faster. The typical home was on the market for just 33 days, compared to 38 days in February.
Investors pulled back slightly, accounting for 15% of sales, compared to 21% in February and 17% in March last year. However, new buyers made a comeback, accounting for 32% of sales, up from 26% in February and 28% the year before.
Cash purchases accounted for 28% of sales, down from 33% in February but up from 27% a year ago. Before the pandemic, that share was generally around 20%.
According to Mortgage News Daily, mortgage rates have gotten even higher this month, with the average 30-year loan rate hovering around 7.5%.
“Every time you get to that round number, it's always that psychological barrier,” Yun said.