'More Declines Are Imminent' as Home Sales Fall for Third Month in a Row

The real estate market showed further signs of weakening in April as existing home sales fell for the third month in a row under the weight of higher prices and rising mortgage rates.

The National Association of Realtors on Thursday reported that sales of single-family homes, townhomes, condominiums and co-ops slid 2.4% from March to a seasonally adjusted annual rate (SAAR) of 5.61 million in April. Sales fell 5.9% from the 5.96 million SAAR in April 2021.

Lawrence Yun, NAR’s chief economist, said buyer activity was reduced by higher home prices and sharply higher mortgage rates.

“It looks like more declines are imminent in the upcoming months, and we’ll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years,” Yun said.

Curt Long, NAFCU’s chief economist and vice president of research, said he expects home sales totals to trend flat this year due to higher rates and inventory shortages.

“Despite the 30-year fixed mortgage rate having reached 5.1% at the end of the month and a record setting 122 months of consecutive year-over-year price increases, demand remains relatively high,” Long said.

NAR found properties stayed on the market 17 days in April, the same as in March and in April 2021. Eighty-eight percent of homes were sold within a month.

Callahan & Associates reported Wednesday that credit unions originated $83.8 billion in real estate loans in the first quarter — only 0.2% greater than in the first quarter of 2021.

The Mortgage Bankers Association on May 16 lowered its forecast for purchase and refinance first mortgage originations this year and next.

The MBA said it now expects lenders to originate $1.69 trillion in purchase originations this year, up 2.9% from 2021. Purchase originations are expected to rise 3.1% to $1.75 trillion in 2023. But those originations are about 5% lower than in its March 21 forecast.

Joel Kan, the MBA’s assistant vice president of economic and industry forecasting, said April’s 5.66 million sales pace was the slowest since the spring of 2020.

“Although the job market is still extremely strong, emerging signs of economic weakness have also added to the overall uncertainty for potential homebuyers,” Kan said.

The median sales price of $391,200 was 15% higher than a year ago.

“Steep home-price appreciation was particularly impactful on first-time home buyers, who have seen their share of home sales decrease to 28% compared to 31% a year ago,” Kan said.

Inventory is just over a two-month supply, which Kan said is still extremely low by historical standards. “The recent slowdown in residential construction activity may prolong this shortage,” he said.

Yun said the housing supply is improving “at an extremely sluggish pace.”

“The market is quite unusual as sales are coming down, but listed homes are still selling swiftly, and home prices are much higher than a year ago,” Yun said.