A detailed analysis of the housing market reveals a subdued beginning to the homebuying season, with several contributing factors.
In March 2023, the U.S. housing market registered a modest decline in home sales, reflecting a somewhat lackluster commencement to the homebuying season. According to the National Association of Realtors, existing home sales fell 0.5% to a seasonally adjusted annual rate of 6.02 million units. This decline indicates a slowdown in the market when compared to February's annualized pace of 6.04 million units.
Economists had forecasted home sales to rise to a 6.1 million-unit pace in March, but the actual figures fell short of these expectations. Despite this decline, the U.S. housing market has seen significant growth over the past year, with a year-over-year increase of 4.5% in existing home sales.
Several factors can be attributed to the tepid beginning of the homebuying season, including rising mortgage rates and the ongoing issue of limited housing inventory. The 30-year fixed mortgage rate has experienced a significant increase, reaching an average of 6.39% this week, up from 5.11% a year ago, as reported by mortgage buyer Freddie Mac. This uptick in mortgage rates has the potential to deter potential homebuyers, as higher rates translate to increased borrowing costs.
Furthermore, the limited housing inventory continues to challenge the market, with the supply of homes for sale remaining constrained. At the end of March, there were 1.29 million previously owned homes on the market, representing a supply of 2.6 months at the current sales pace. This figure is significantly lower than the ideal supply of 6 months, which is indicative of a balanced market. The scarcity of available homes has contributed to heightened competition among buyers, subsequently driving up prices. The median price for an existing home in March reached $392,700, marking a year-over-year increase of 11.9%.
Despite the challenges faced by the housing market, certain regions in the U.S. have experienced growth in home sales. The Northeast saw an increase of 2.9% in sales, while the Midwest experienced a 2.0% uptick. On the other hand, the South and the West witnessed declines of 1.2% and 0.8%, respectively.