Existing-home sales fell 2.4% to a seasonally adjusted annual rate of 5.61 million in April, the third consecutive month of decline, according to the National Association of Realtors (NAR).
Sales were down 2.4% from March and 5.9% YOY. All of the four major regions saw declines in YOY sales, though two posted month-over-month gains.
Unsold home inventory rose to 1.03 million at month’s end, or 2.2 months of supply at the current sales pace. Total inventory rose 10.8% from March but is still down 10.4% from the same time last year.
“Higher home prices and sharply higher mortgage rates have reduced buyer activity,” said NAR Chief Economist Lawrence Yun.
“It looks like more declines are imminent in the upcoming months, and we’ll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years.”
Home price appreciation kept up but at a slower YOY pace of 14.8%, with the median existing-home sales price rising to $391,200.
“The market is quite unusual as sales are coming down, but listed homes are still selling swiftly, and home prices are much higher than a year ago,” said Yun.
“Moreover, an increasing number of buyers with short tenure expectations could opt for 5-year adjustable-rate mortgages, thereby assuring fixed payments over five years because of the rate reset. The cash buyers, not impacted by mortgage rate changes, remain elevated.”
ARMs are becoming more attractive to homebuyers facing elevated home prices and inflation pressure. Redfin recently reported that the typical homebuyer could save more than $15,000 over five years, about $260 per month, by choosing an ARM. It’s the largest savings in dollar terms for adjustable-rate mortgage holders since at least 2015.
But ARMS pose risks because it’s difficult to predict the future of interest rates.
“Adjustable-rate mortgages can work really well for homebuyers who plan to stay in their home for less than 5 to 10 years and have the means to cover higher payments when the loan resets,” said Arnell Brady, a Senior Loan Officer at Bay Equity Home Loans.