The number of U.S. existing-home sales is falling, but it’s definitely not a drag on price growth. The National Association of Realtors (NAR) data shows existing-home sales fell in March. The drop in sales is largely attributed to falling inventory. This has created more pressure on home prices, driving them to new record highs.
U.S. Existing-Home Sales Fall 3.7% In March
U.S. existing-home sales made a slight dip, but came in much higher than they were this time last year. NAR reported 6.01 million existing-home sales when seasonally adjusted at the annual rate (SAAR) for March, down 3.7% from a month before. This is a huge 12.3% higher than the same month last year. Mixed directions, I know. Let’s unpack it.
U.S. Existing-Home SalesU.S. existing-home sales seasonally adjusted at the annual rate (SAAR). Source: NAR; Better Dwelling.
Monthly growth is likely telling us more than annual growth, due to the base effect. Last March, U.S. existing-home sales made an abrupt fall of 8.5% from the month before. The drop was entirely due to restricted movement at the onset of the pandemic. This made March 2020 sales the lowest since April 2019. The base effect makes a small dip last month, look like a huge annual jump. Typically we see February to March sales rise, not fall.
U.S. Home Prices Hit A New Record High
U.S. home prices on the other hand are chugging higher, as more expensive homes make up more sales. Existing homes had a median sale price of $329,100 in March, up 6.9% from the month before. Compared to the same month a year before, this is a record-smashing 17.2% higher. This marks the 109th month of annual home price growth in positive territory. Home prices are at an all-time high, the rate of growth is at an all-time high, and the length of price growth without a correction, is the longest ever.
U.S. Existing-Home Median Sales PriceThe median unadjusted sale price for homes across the U.S. Source: NAR; Better Dwelling.
The two big trends driving both of these numbers are a shortage of inventory and mortgage rates. Mortgage rates are lower than last year, giving people much more room to absorb higher prices. A shortage of inventory tends to cause more competition for the same homes.
That also impacts home sales, since you can’t really buy as many homes if there are fewer on the market. While mortgage rates are lower than last year, they’ve still climbed a lot since January. This makes it a little more difficult for borrowers to find the budgets to absorb prices, even though it’s better than last year. Rising mortgage rates are likely to produce a further drag on home price growth as they rise further.
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