Existing Home Sales Unexpectedly Drop to 7-Month Low

Despite the brief retreat in mortgage rates and increased supply, existing home sales dropped to 7-month low in April, according to the National Association of Realtors (NAR). This unexpected decline suggests buyers’ activity continues to be constrained by economic uncertainty and ongoing affordability challenges even with improved market conditions.

While existing home inventory improved, the market faces headwinds as mortgage rates are expected to stay above 6% for longer due to an anticipated slower easing pace in 2025. These prolonged higher rates may continue to discourage homeowners from trading existing mortgages for new ones with higher rates, keeping supply tight and prices elevated. As such, sales are likely to remain limited in the coming months due to elevated mortgage rates and home prices.

Total existing home sales, including single-family homes, townhomes, condominiums, and co-ops, fell 0.5% to a seasonally adjusted annual rate of 4.00 million in April. On a year-over-year basis, sales were 2.0% lower than a year ago.

The first-time buyer share was 34% in April, up from 32% in March and 33% from a year ago.

The existing home inventory level was 1.45 million units in April, up 9.0% from March, and up 20.8% from a year ago. At the current sales rate, April unsold inventory sits at a 4.4-months’ supply, up from 4.0-months in March and 3.5-months in April 2024. This inventory level remains low compared to balanced market conditions (4.5 to 6 months’ supply), but it increases growing competition for home builders.

Homes stayed on the market for an average of 29 days in April, down from 36 days in March but up from 26 days in April 2024.

The April all-cash sales share was 25% of transactions, down from 26% in March and 28% a year ago. All-cash buyers are less affected by changes in interest rates.

The April median sales price of all existing homes was $414,000, up 1.8% from last year. This marked an all-time high for the month and the 22nd consecutive month of year-over-year increases. The median condominium/co-op price in April was up 1.4% from a year ago at $370,100. This rate of price growth will slow as inventory increases. Existing home sales in April were mixed across the four major regions. Sales fell in the West (-3.9%) and Northeast (-2.0%), rose in the Midwest (2.1%), and remained unchanged in the South. On a year-over-year basis, sales were down in the Midwest (-1.0%), South (-3.2%) and West (-1.3%), while remaining flat in the Northeast.

The Pending Home Sales Index (PHSI) is a forward-looking indicator based on signed contracts. The PHSI jumped from 72.1 to 76.5 in March, the largest monthly increase since December 2023. This increase suggests homebuyers are highly sensitive to even small changes in mortgage rates. On a year-over-year basis, pending sales were 0.6% lower than a year ago, per National Association of Realtors data.