The spring housing market, typically a peak season, is off to a sluggish start due to high mortgage rates and economic uncertainty. Sales of previously owned homes in March fell by 5.9% compared to February, totaling 4.02 million units on a seasonally adjusted annualized basis, according to the National Association of Realtors (NAR). This marks the slowest sales pace for March since 2009.
Sales Decline Across All Regions
March’s sales were 2.4% lower than the same month in 2024, with declines in every region of the country. The West, which is the most expensive housing market, saw the steepest decline, down more than 9%. However, the West was the only region to see a year-over-year gain, primarily driven by strong activity in the Rocky Mountain states, where job growth remains robust.
Impact of High Mortgage Rates
Sales data for March reflect contracts likely signed in January and February, when the average rate for a 30-year fixed mortgage was over 7%. The rate did not dip below 7% until February 20, according to Mortgage News Daily. “Home buying and selling remained sluggish in March due to the affordability challenges associated with high mortgage rates,” said Lawrence Yun, NAR’s chief economist. He noted that historical lows in housing mobility could signal a broader lack of economic mobility.
Rising Inventory But Slow Sales
Despite the decline in sales, the number of available listings saw a sharp increase. At the end of March, there were 1.33 million units for sale, a 20% increase from the previous year. This was equivalent to a 4-month supply at the current sales pace, which remains lean compared to the balanced market standard of a 6-month supply. However, the rise in inventory and slower sales are starting to affect prices.
Price Growth Slows
The median price of an existing home in March was $403,700, marking an all-time high for the month. However, this represents a modest 2.7% increase compared to March 2024, the smallest year-over-year gain since August. The slowing price growth contrasts with gains seen in the stock and bond markets, although household wealth in residential real estate continues to reach new heights. Yun pointed out that with real estate asset valuations hitting $52 trillion, every percentage point increase in home prices adds over $500 billion to household balance sheets.
First-Time Buyers and Investor Activity
First-time homebuyers made up 32% of the market in March, consistent with the previous year but below the historical average of around 40%. All-cash sales dropped slightly to 26% from 28% the year before, while investors maintained a steady presence, accounting for 15% of sales.
Uncertainty Looms
Looking ahead, the NAR has already reported an increase in canceled contracts in March, with the potential for further cancellations due to stock market volatility. “March numbers are bad, but they’re likely to get worse,” said Robert Frick, corporate economist at Navy Federal Credit Union. He highlighted the added pressures from high prices, mortgage rates, and rising costs for home furnishings due to tariffs, alongside growing consumer anxiety over inflation and job security.
