WASHINGTON (Reuters) – U.S. existing home sales fell in March as a reversal in mortgage rates likely pushed buyers back to the sidelines, but there are tentative signs that the housing market slump is close to reaching a bottom.
Existing home sales dropped 2.4% to a seasonally adjusted annual rate of 4.44 million units last month, the National Association of Realtors said on Thursday. They had increased in February for the first time in a year.
Existing home sales are counted at the closing of a contract. Last month’s sales likely reflected some contracts signed in February, when mortgage rates started rising again after mostly decreasing in January.
“Consumers appear to be very sensitive to changes in mortgage rates,” said Lawrence Yun, the NAR’s chief economist. “The week-to-week changes in mortgage rates are having a big impact.”
Sales fell in the West, Midwest and the densely populated South, but were unchanged in the Northeast.
Economists polled by Reuters had forecast home sales would fall to a rate of 4.50 million units. Home resales, which account for a big chunk of U.S. housing sales, tumbled 22.0% on a year-on-year basis in March.
The Federal Reserve’s aggressive interest rate hiking campaign has plunged the housing market into recession, with residential investment contracting for seven straight quarters, the longest such streak since the collapse of the housing bubble triggered by the 2007-2009 Great Recession.
But the worst is probably over. A survey on Monday showed the National Association of Home Builders/Wells Fargo Housing Market index climbed to a seven-month high in April.
Single-family homebuilding increased for a second straight month in March, while permits for future construction surged, the government reported on Tuesday.
Mortgage rates declined from mid-March through mid-April, in tandem with U.S. Treasury yields, on hopes that the Fed would not continue raising borrowing costs beyond next month amid signs that the economy was slowing.
That should pull some buyers back into the market. But the recent financial turmoil following the collapse of two regional banks could result in banks and mortgage lenders tightening underwriting standards.
The median existing house price fell 0.9% from a year earlier to $375,700 in March. That was the largest decline since January 2012.
There were 980,000 previously owned homes on the market, up 5.4% from a year ago. At March’s sales pace, it would take 2.6 months to exhaust the current inventory of existing homes, up from 2.0 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.
Properties typically remained on the market for 29 days, down from 34 days in February. Sixty-five percent of homes sold in March were on the market for less than a month.
First-time buyers accounted for 28% of sales, down from 30% a year ago. All-cash sales made up 27% of transactions compared to 28% a year ago. Distressed sales, including foreclosures, represented only 1% of transactions, largely unchanged from a year ago.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
