The housing market in April 2023 experienced a significant decline in sales of previously owned homes, with a 1.9% decrease in sales compared to March. This unexpected decrease has raised concerns among economists and real estate experts about the future of the housing market.
One of the major factors contributing to the decline in home sales is the sharp increase in mortgage rates at the beginning of February. With rates hovering around 7% for the next two months before climbing even higher in April, potential buyers were deterred from entering the market. Lawrence Yun, chief economist for the Realtors, highlights the impact of these higher rates on the housing market, noting that the 300 basis point increase from the pre-Covid pace has created a new challenge for home sales.
The total housing inventory at the end of April stood at 1.21 million units, up 9% from the previous month and 16% from the year before. However, this increase in inventory still only represents a 3.5-month supply at the current sales pace, well below the balanced level of a six-month supply. The imbalance in supply and demand has put pressure on home prices, with the median price of an existing home reaching $407,600 in April, a 5.7% increase from the previous year.
Regionally, sales in different parts of the country experienced varying trends. In the Northeast, sales fell by 4% from March and April 2023, with the median price reaching $458,500, an 8.5% year-over-year increase. The Midwest saw a 1% decline in sales from the previous month and year, with a median price of $303,600, a 6% increase from April 2023. Sales in the South dropped by 1.6% from March and 3.1% from the previous year, with a median price of $366,200, up 3.7% year over year. In the West, sales were down by 2.6% for the month but rose by 1.3% from the previous year, with a median price of $629,600, up 9.3% year over year.
The housing market also witnessed disparities across different price segments. Sales of homes priced below $100,000 fell by 7.1% year over year, while sales of homes priced above $1 million saw a significant increase of 40%. The supply of homes priced above $1 million rose by 34% year over year, indicating a growing demand for luxury properties. Additionally, the median price of an existing home reaching $407,600, a record high for April, reflects the ongoing pressure on prices due to tight supply and strong demand.
The housing market in April 2023 faced challenges stemming from higher mortgage rates, limited inventory, and regional variations in sales trends. While first-time buyers showed a slight increase in market share, the overall sales volume declined compared to the previous month and year. Economists and real estate experts will be closely monitoring these trends to assess the future trajectory of the housing market.
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