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A sizable drop in mortgage interest rates didn't do much to help home sales in April, as high prices and tight supply at the low end of the market continued to sideline buyers.
Sales of existing U.S. homes fell 0.4% in April compared with March to a seasonally adjusted annualized rate of 5.19 million units, according to the National Association of Realtors. Sales were 4.4% lower compared with April 2018. That was the 14th straight month of annual declines.
Existing sales make up about 90% of the total sales market, as new construction continues to lag historically normal levels of production. The NAR's reading counts closed sales, so it reflects buyers out signing contracts in February and March. The average rate on the 30-year fixed dropped sharply in March, so the expectation had been for a gain in sales, but the Realtors' chief economist said he is not concerned.
"First, we are seeing historically low mortgage rates combined with a pent-up demand to buy, so buyers will look to take advantage of these conditions," said NAR's Lawrence Yun. "Also, job creation is improving, causing wage growth to align with home price growth, which helps affordability and will help spur more home sales."
The median price for an existing home sold in April, including single-family and condominiums, was $267,300, a 3.6% annual increase. Prices have been gaining year over year for 86 straight months. The gains have been shrinking, however, since last summer, as more inventory comes on the market. They overheated dramatically over the past few years, however, and some major metropolitan markets are still overvalued and prohibitively expensive for entry-level buyers.
The inventory of existing homes for sale increased to 1.83 million, up 1.7% annually to a 4.2-month supply at the current sales pace. Homes sat on the market for an average of 24 days in April, down from 36 days in March and down from 26 days a year ago. Slightly more than half of the homes sold in April were on the market for less than a month.
"We see that the inventory totals have steadily improved, and will provide more choices for those looking to buy a home," Yun said, adding that sellers have to realize that price growth has moderated. "When placing their home on the market, home sellers need to be very realistic and aware of the current conditions."
While more homes are on the market, part of the increase is simply that it is taking longer overall for homes to sell. As they sit on the market, supply swells. The new supply is not, however, changing forecasts for future sales.
"Our outlook for the housing market remains largely unchanged," wrote Sam Khater, Freddie Mac's chief economist, in a monthly report. "We still expect stronger home sales and housing starts in the coming months due to favorable market conditions and accelerating wage growth."
Regionally, home sales in the Northeast decreased 4.5% to an annual rate of 640,000. The median price in the Northeast was $277,700, up 0.9% from April 2018.
In the Midwest, existing-home sales saw relatively no percentage change from the month prior, as the annual rate remained 1.17 million, which is 7.9% below April 2018 levels. The median price in the Midwest was $210,500, an increase of 5.5% from a year ago.
Existing-home sales in the South dropped 0.4% to an annual rate of 2.27 million, down 1.7% from a year ago. The median price in the South was $236,800, up 4.4% from a year ago.
Existing-home sales in the West rose 1.8% to an annual rate of 1.11 million in April, 5.9% below a year ago. The median price in the West was $395,100, up 1.3% from April 2018.