WASHINGTON (Reuters) -U.S. existing home sales unexpectedly fell in April despite a temporary drop in mortgage rates and increased supply, and could remain lackluster this year amid rising economic uncertainty.
Home sales slipped 0.5% last month to a seasonally adjusted annual rate of 4.00 million units, the National Association of Realtors said on Thursday. Economists polled by Reuters had forecast home resales would rise to a rate of 4.10 million units.
Sales last month were the slowest for April since 2009, signaling a weak start to the spring selling season. They declined 2.0% on a year-over-year basis in April.
“Home sales have been at 75% of normal or pre-pandemic activity for the past three years,” said Lawrence Yun, the NAR’s chief economist.
Existing home sales are counted at the closing of a contract. Sales last month likely reflected contracts signed in February and March, when the average rate on the popular 30-year fixed-rate mortgage bounced around in the lower end of its 6.09%-6.73%, data from mortgage finance agency Freddie March showed. The rate has since risen, averaging 6.81% last week.
Mortgage rates have increased in tandem with the yield on the benchmark 10-year U.S. Treasury note amid President Donald Trump’s aggressive trade policy and concerns about the nation’s deteriorating fiscal outlook after Moody’s Investors Service cut its sovereign credit rating from the top “Aaa” level.
With sales being weak, the inventory of existing homes increased 9.0% to 1.45 million units in April. Supply soared 20.8% from a year ago. An oversupply of new homes on the market could pull buyers away from previously owned ones. Builders are cutting prices and offering incentives to attract customers.
“At the macro level, we are still in a mild seller’s market,” Yun said. “But with the highest inventory levels in nearly five years, consumers are in a better situation to negotiate for better deals.”
The median existing home price increased 1.8% from a year earlier to $414,000 in April, the highest on record for the month. Prices increased in the Northeast and Midwest, but declined in the South and West.
At April’s sales pace, it would take 4.4 months to exhaust the current inventory of existing homes, up from 3.5 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.
Properties typically stayed on the market for 29 days last month compared to 26 days a year ago.
First-time buyers accounted for 34% of sales, edging up from 33% a year ago. Economists and realtors say a 40% share is needed for a robust housing market.
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