WASHINGTON (Reuters) - U.S. existing home sales fell in March as higher interest rates and house prices sidelined buyers from the market.
Home sales dropped 4.3% last month to a seasonally adjusted annual rate of 4.19 million units, the National Association of Realtors said on Thursday. Economists polled by Reuters had forecast home resales slipping to a rate of 4.20 million units.
Sales fell in the densely populated South, the Midwest, which is considered the most affordable region, and the West. They rose in the Northeast for the first time since November. Home resales, which account for a large portion of U.S. housing sales, declined 3.7% on a year-on-year basis in March.
"Though rebounding from cyclical lows, home sales are stuck because interest rates have not made any major moves," said Lawrence Yun, the NAR's chief economist.
The average rate on the popular 30-year fixed-rate mortgage has drifted up towards 7%, data from mortgage finance agency Freddie Mac showed, as strong reports on the labor market and inflation suggested the Federal Reserve could delay an anticipated rate cut this year. A few economists doubt that the U.S. central bank will lower borrowing costs in 2024.
Fed Chair Jerome Powell said on Tuesday the U.S. central bank might need to keep rates higher for longer than previously thought as inflation remains elevated.
The Fed has kept its policy rate in the 5.25%-5.50% range since July. It has raised the benchmark overnight interest rate by 525 basis points since March of 2022.
Housing inventory jumped 4.7% to 1.11 million units last month. Though supply vaulted 14.4% from one year ago, it remains below the nearly 2 million units before the COVID-19 pandemic. The government reported on Tuesday that single-family housing starts tumbled in March and permits for future construction dropped to a five-month low.
At March's sales pace, it would take 3.2 months to exhaust the current inventory of existing homes, up from 2.7 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.
Despite the improvement in supply, the median existing home price increased 4.8% from a year earlier to $393,500 in March. That was a record high for the month of March. Home prices increased in all four regions.
Data from mortgage finance agency Fannie Mae on Wednesday showed house prices increased 7.4% year-on-year in the first quarter compared to a 6.6% rise in the fourth quarter.
The NAR said properties typically stayed on the market for 33 days in March, up from 29 days a year ago. First-time buyers accounted for 32% of sales, compared to 28% a year ago. That share is well below the 40% that economists and realtors say is needed for a robust housing market.
All-cash sales made up 28% of transactions, up from 27% a year ago. Distressed sales, including foreclosures, represented only 2% of transactions, virtually unchanged from last year.