The housing market faced a challenging start to the critical spring season as many potential buyers sat on the sidelines, waiting out economic uncertainty. Because of this, existing home sales fell in March, resulting in the steepest monthly drop since 2022, which brings to light a market that’s under pressure.
According to the National Association of Realtors (NAR), U.S. existing home sales dropped by 5.9% from February, reaching a seasonally adjusted annual rate of 4.02 million. With home prices at unaffordable levels and mortgage rates nearing 7%, we could be in store for a third year of slow sales.
Related Article: Pending Home Sales See Record Cancellation Rates as More People Turn to Rentals
Rising Challenges Diminish Optimism for the Spring Homebuying Season
Spring is traditionally the busiest time for home buying as families with school-aged children try to move during the summer and sellers list their properties to take advantage of high demand.
This year, however, hopes for a busy spring season have faded. The gap between current supply and demand is being pushed further apart, with housing inventory increasing at a pace that can’t be matched by buyer interest. On top of this, many sellers who have been tired of waiting for mortgage rates to lower decided to put their homes on the market, providing buyers with more options. Even so, high, near-record home prices, as well as unmanageable mortgage rates have left buyers waiting in the wings.
Related Article: Report Reveals Homeowners Must Earn 81.8 Percent More Than Renters to Make Home Affordability Possible
Home Sales Fell as Economic Uncertainty Weighs Heavily on Buyers
Economic concerns have further dampened buyer confidence, with some delaying large financial commitments in light of fears around potential job losses, market instability, and tariff wars that could impact the economy. However, home sales data from March mostly reflects purchase decisions made in earlier months, January and February, before economic turbulence intensified.
Related Article: U.S. Consumer Sentiment Tanks Over Inflation Fears According to Survey
While there was a brief uptick in February’s sales, brought on by buyers and sellers acting before the unpredictability worsened, the momentum quickly lost its steam as uncertainty grew. Lawrence Yun, NAR’s chief economist, commented on the slow pace, “Even with more inventory, existing home sales are struggling to get traction. I was hoping that we would begin to see some meaningful recovery this year. Well, so far, it’s not happening.”
Local Housing Market Variations and Pricing Trends
Despite a national struggle, local markets show various trends. Places like Texas and Florida, where inventories have risen, are experiencing year-over-year price declines. On a national scale, however, prices climbed in March due to limited supply relative to pre-pandemic norms. The median national existing home price hit $403,700, a rise of 2.7% from the previous year, which marks a record high for March. There were also 1.33 million properties for sale at the end of the month in March, and this is a rise of 8.1% from the previous month.
In addition to this, there’s been an increased frequency of price reductions. In fact, a quarter of Zillow listings in March saw cuts, which shows conditions shifting in the buyer’s favor. What this comes down to is that more purchasers are now negotiating for concessions, like seller contributions toward closing costs or mortgage-rate buydowns. Redfin reported that around 44% of first-quarter home sales had seller concessions included in the deal.
Buyer Challenges – Home Purchases Out of Reach
For many prospective buyers, the current market remains out of reach. Homes sold in March spent an average of 36 days on the market compared to 33 the year before, reflecting slower activity levels. Ultimately, while the housing market shows some signs of stabilization in specific areas, the broader view remains uncertain.
Increasing inventory levels provide more options for buyers and slightly reduce competition, yet affordability concerns and market hesitancy are likely to keep sales at a snail’s pace for the foreseeable future.
Drop in Home Sales Pushes Demand for Rentals Upward
The data shows that home sales fell, and with this comes the reality that families are looking to rentals for shelter, a move that is fueling the rental real estate sector. Along with this, with economic insecurities on the rise and rental properties acting as a hedge against inflation, investors are making their move while the market is right.
Seasoned investors know they don’t have to get caught up in the insecurities of the volatile economy or the unstable housing market. Instead, they’re taking advantage of the situation and coming out on top. If your interest has been sparked and you’d like to make a move, feel free to schedule a call with Morris Invest to discuss placing a new construction rental property into your portfolio. In the meantime, check out our power resources below, as well as our Morris Invest & SDIRA Programs overview page.
- Freedom Number Cheat Sheet
- 90-Day Financial Empowerment Bootcamp
- The Financial Freedom Academy
- Morris Invest & SDIRA Programs
Before you go, dive into the following video that covers the affordable housing crises in detail:
