Existing home sales drop in March, median price hits new record

Existing home sales fell 2.7% in March to a seasonally adjusted annual rate of 5.77 million units, according to the National Association of Realtors. The February reading was also revised lower with a larger-than-normal drop, from 6.02 million units to 5.93 million.

March sales were 4.5% lower than the same period in 2021.

The reading is based on closings, which means contracts are likely to be signed in January and February, when mortgage rates started rising but have not yet risen as sharply as they did in March. The average 30-year fixed-rate mortgage was 3.29% at the beginning of January and had risen to 3.9% at the end of February, according to daily mortgage news. The 30-year fixed rate is now 5.35%.

High prices exacerbated an already expensive market for buyers. The median price for an existing home sold in March was $375,300, a 15% increase from March 2021. This is the highest average price ever recorded by brokers.

With prices rising, and prices rising significantly, the average borrower is paying about 38% more on the monthly payment than they would have paid for the same home one year ago, according to Realtor.com.

Prices continue to rise because the supply of homes for sale is still incredibly low amid strong demand from millennials. At the end of March, there were 950,000 homes for sale, down 9.5% year over year. At the current sales pace representing a two-month supply.

The supply of homes for sale is the worst at the lower end of the market, skews sales toward the more expensive end.

Sales of homes between $100,000 and $250,000 were 21% lower than last year, while sales of homes between $750,000 and $1 million were up 30%. Homes priced over $1 million saw a 25% jump in sales.

“We know that builders have been underproductive since the foreclosure crisis, which is why there is such a shortage,” said Lawrence Yun, chief economist at the National Association of Realtors. “But when mortgage rates go up, we’ve seen inventory go up for several months.”

Homes for sale are moving quickly with the average number of days on the market just 17, down from 18 a year ago. And criticism is king. It accounted for 28% of total sales in March, the highest since July 2014.

The latest weekly housing data from Realtor.com suggests that supply may be on the rise, with an increase in new listings.

“There is some good news for buyers as we are usually at the best time of the year to list a home for sale,” Danielle Hill, chief economist at Realtor.com said in a statement. “Together with the moderation in home sales, this should mean more options for the rest of the home seekers to choose from.”