April home sales disappoint as higher mortgage rates weigh on buyers

Sales of previously owned homes in April were essentially flat compared with March, rising just 0.2% to 4.02 million units on a seasonally adjusted, annualized basis, according to the National Association of Realtors. Housing analysts were expecting a gain of more than 3%.

April sales were unchanged year-over-year. This count is based on closings, so contracts likely signed in late February and March. The average rate on the 30-year fixed mortgage ended March in the high 5% range, according to Mortgage News Daily, and then shot up sharply, due to the start of the U.S.-Israel war with Iran.

“Despite mixed macroeconomic signals—including a record-high stock market and historically low consumer confidence—home sales were modestly boosted by the continued improvement in housing affordability,” said Lawrence Yun, NAR’s chief economist, in a release. “Mortgage rates are lower from a year ago, and average income growth is outpacing home price gains.”

Inventory in April rose 5.8% from March, but was up just 1.4% from the previous April to a 4.4-month supply. That is still considered tight, as a 6-month supply represents a balanced market between buyer and seller.

“We really need to see 30% growth in inventory, but we are not seeing that,” Yun said. “Multiple offers, though not as intense as a few years ago, are still occurring. At the same time, days on market are lengthening on average, implying that consumers are taking their time before making decisions.”

That pushed prices higher. The median price of a home sold in April was $417,700, up 0.9% from the year before. That is the highest April price on the NAR’s record.

The average days on market increased to 32 days in April, up from 29 days during the same month last year. First-time buyers represented a 33% share of sales during the month, down slightly from a year ago. One quarter of all sales were all cash, unchanged from last year.

Mortgage rates have remained higher, starting this week at 6.42%. Other reports this month show that while pending sales have increased some in April and May, supply is tightening again. That will continue to lift prices.