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In April, sales of existing homes slipped 2.4 percent from March and 5.9 percent year on year to their slowest rate since June 2020, when the economy was battered by the onset of the COVID War, the National Association of Realtors (NAR) reported.
The figure represents contracts signed in February and March for sales that closed in April, the NAR noted.
Mortgage interest rates were rising through the period.
Rates for a 30-year, fixed-rate loan began February at 3.66 percent and ended March at 4.78 percent, according to Mortgage Daily News.
The average rate was 5.47 percent on 23 May, Forbes said.
“We are moving back to pre-[COVID] sales activity,” NAR chief economist Lawrence Yun said in a statement announcing the April figure. “I expect further declines.”
The shortage of homes available to buy continued in April, with 1.03 million units on the market, 10.4 percent fewer than a year earlier. At the current pace of sales, that represents a 2.2-month supply.
That shortage pushed the median price of existing homes sold last month to a record $391,200, 14.8 percent higher than a year earlier.
However, that figure is skewed higher because more homes are for sale at the market’s high end than in the middle or lower price ranges, the NAR noted.
Sales of homes priced at $250,000 or less fell 29 percent in April, year on year. In contrast, homes with asking prices of $500,000 to $750,000 climbed 19 percent; million-dollar home sales rose 16 percent.
The average home spent 17 days on the market before being bought, according to the NAR.
All-cash deals made up 25 percent of April’s sales and investors—buyers who will not live in the homes they buy—accounted for 17 percent of buyers.
Investors have claimed an increasing share of the housing market in recent years, buying houses—usually for cash—in popular locales and renting them out at premium prices to people unable to qualify for or afford a mortgage.
We have documented this trend in a series of articles, including:
- “Real Estate Investors Choosing Single-Family Rental Homes” (13 Oct 2020)
- “Invitation Homes to Buy $1 Billion Worth of Houses This Year” (1 Jun 2021)
- Rents for Single-Family Homes Reach 15-Year High (1 Jun 2021)
- “Blackstone Extends Reach Into Housing Market” (29 Jun 2021)
- “Private Equity Partners Target $5 Billion in Rental Houses” (27 Jul 2021)
- “Residential Rental Rates Skyrocketing” (10 Aug 2021)
- “Rents Soar as Investors Buy Properties and Raise Rates” (14 Sep 2021)
- “Investors Now Targeting Off-Campus Student Housing” (14 Sep 2021)
- “Rents Soaring. What’s Next?” (21 Sep 2021)
- “Single-Family Rental Homes: Investments Galore” (16 Nov 2021)
- “Home Sales Up as Money Gang Gobbles Up Houses” (23 Nov 2021)
- “Rents on the Rise” (11 Jan 2022)
Only 28 percent of April’s sales were to first-time home buyers, compared to the 40 percent that typified pre-COVID home sales.
Investors’ growing footprint, rising home prices, and now rising interest rates have squeezed an increasing number of first-time buyers—who typically are of middle or modest incomes—out of the market, leaving them to rent the houses that investors bought out from under them.
Figures for the April purchase of newly-built homes will be released next month.
However, mortgage applications for newly-built houses fell 11 percent in April, year on year, the Mortgage Bankers Association (MBA) said.
“The spike in mortgage rates cooled demand and home buyers continued to grapple with rising costs, supply chain issues, and extended completion timelines,” Joel Kahn, MBA’s vice-president of forecasting, told CNN Business.
TREND FORECAST: Like a fire, the housing boom has consumed its fuel and is burning itself out. As we reported today, with mortgage rates double what they were year-to-date, the U.S. Census Bureau reported that newly built homes sales slumped over 16 percent in April from March… and are down nearly 27 percent from last April.
Desirable homes for sale in popular markets have been sold; the large majority of qualified buyers have bought. Stratospheric prices will continue to squeeze out the majority of people who still want to buy, mainly people with incomes too low to afford the required mortgage.
In addition, materials costs will remain aloft due to shortages and open land suitable for siting houses is becoming more scarce all the time.
Home prices will remain high but will drop somewhat as interest rates rise. When the U.S. Federal Reserve sets its key rate at or above 1.5 percent, home sales will fall dramatically.