Challenges Facing the Spring Housing Market: Insights from Recent Trends
As the crucial spring housing market unfolds, a combination of elevated mortgage rates and economic uncertainty is creating obstacles for potential home buyers and sellers. According to data from the National Association of Realtors, in March, sales of previously owned homes decreased by 5.9% from February, amounting to approximately 4.02 million units on a seasonally adjusted annual basis. This marks the slowest pace for March sales since 2009.
On a year-over-year basis, sales were down by 2.4% compared to March 2024, with declines noticed across all regions. The West, which is considered the most expensive area in the country, experienced the largest decline, dropping over 9%. Interestingly, it was also the only region to report a year-over-year increase, primarily attributed to robust job growth in the Rocky Mountain states.
These sales figures reflect transactions that likely resulted from contracts signed during earlier months, specifically January and February when the average interest rate for a conventional 30-year fixed mortgage exceeded 7%. Rates did not dip below 7% until late February, according to findings by Mortgage News Daily.
Lawrence Yun, the chief economist at the National Association of Realtors, commented, “The sluggish nature of home buying and selling in March can be traced back to the affordability issues created by high mortgage rates. The current state of residential mobility is at historical lows, raising concerns about potential economic mobility in society.”
Despite a significant rise in available housing inventory, sales volumes continued to decline. By the end of March, there were 1.33 million homes on the market, reflecting nearly a 20% increase from March 2024. This current pace of sales suggests a 4-month supply of homes available for sale, which is still on the lower end of a balanced market—typically defined as a 6-month supply.
The combination of increased inventory and slower sales is beginning to exert downward pressure on home prices. The median price for existing homes sold in March reached $403,700, representing an all-time high for that month. However, this figure increased by only 2.7% compared to the same month last year. The trend indicates shrinking annual comparisons, with this being the smallest increase since August of the previous year.
Yun remarked on the contrasting situation in household wealth connected to real estate, stating, “While stock and bond markets fluctuate, house values in residential real estate continue to soar. With total real estate asset valuation reaching $52 trillion according to the Federal Reserve’s Flow of Funds, every point gain in home prices adds over $500 billion to household net worth.”
In March, first-time buyers constituted 32% of home sales, which remains unchanged from March 2024. Typically, these buyers account for about 40% of the market. Meanwhile, the proportion of all-cash purchases saw a decline to 26% from 28% the previous year, though investor purchases remained constant at 15% of the total sales.
As we look ahead to future trends, real estate professionals have noted an uptick in canceled contracts during March. With ongoing fluctuations in the stock market throughout April, it is expected that this trend may continue to rise.
Robert Frick, a corporate economist with Navy Federal Credit Union, commented on the outlook, stating, “While the March figures are concerning, we might face even tougher times ahead. Alongside the existing pressures of high loan costs and home prices, we anticipate increases in home furnishing costs due to tariffs. Moreover, rising consumer anxiety regarding inflation and job security may amplify a tendency for families to adopt a more conservative approach.”
The current landscape in the housing market illustrates a complex mix of challenges, from high mortgage rates to economic apprehensions. While demand from first-time buyers remains steady, the overall market is experiencing significant shifts, compelling both buyers and sellers to recalibrate their expectations as the season progresses.
