WASHINGTON (TNND) – Home sales cratered in March as high rates and economic uncertainty got the traditionally busy spring homebuying season off to a poor start in a troublesome sign for a housing market entering its third year of slumping sales.
Existing home sales fell 5.9% March compared to the month prior, the National Association of Realtors said on Thursday. It was the biggest month-to-month dip since November of 2022. Home sales were down 2.4% compared to last year and are facing a difficult path ahead with tariff and recession fears hovering over the economy.
The drop in sales diminishes hopes the spring season would bring signs of a market turnaround after two consecutive years of lackluster sales at lows not seen in 30 years.
“Home buying and selling remained sluggish in March due to the affordability challenges associated with high mortgage rates,” said NAR chief economist Lawrence Yun. “Residential housing mobility, currently at historical lows, signals the troublesome possibility of less economic mobility for society.”
Prices have continued a steady upward climb despite the prolonged struggles in the housing market. The national median sales price for an existing home rose to $403,700 in March, a 2.7% increase from the year prior and an all-time high for the month of March. It was the 21st consecutive month of price gains, though the rate at which prices are increasing has slowed recently with more homes sitting on the market and slower activity.
The housing market has been in a prolonged freeze that is entering its third year as affordability issues have continued to keep would-be buyers out of the market with record list prices and elevated mortgage rates that further exacerbate the problem.
Rates tend to fall during times of economic uncertainty but have not moved significantly since shooting back up from pandemic-era lows when the Federal Reserve ratcheted up its benchmark interest rate.
Mortgage rates have been hovering around 7% for the last year and have shown few signs of budging even with recent volatility in the bond markets. Mortgages tend to move with the rates on 10-year Treasury bonds that are still elevated despite all the economic uncertainty from tariffs and a trade war with China.
Modest relief from the higher rates have spurred rushes of buyers back to the market to strike a deal with a window of affordability but whether the recent spurts of positive momentum will stick is unclear.
Consumers are facing high levels of economic uncertainty with whiplash from tariff policy from the White House and a back-and-forth trade war with China. Economists and forecasters are worried the tariffs will lead to higher prices and less spending that powers the American economy, and many have increased the odds of a recession in the next year.
Consumer sentiment has also plummeted through the first quarter in a development that could be an indicator of reduced spending. Americans have continued to open their wallets but there are also concerns they may pull back on spending on discretionary items and put off making big purchases like buying a new car or home.
A Redfin survey released last week found 24% of Americans are canceling plans to make a major purchase with another 32% delaying those plans while they wait to see what happens.
Tariffs are also expected to impact the housing market through increasing the cost of construction with key materials like lumber and concrete subject to tariffs that will increase costs for builders that could get passed onto buyers. If higher costs continue, builders are less likely to increase the level of construction, leaving a longstanding shortage of homes to buy.
Housing starts for single-family homes plummeted 14.2% in March on the heels of tariff announcements and elevated rates that add financial challenges for builders and buyers. The National Association of Homebuilders said last week that higher costs are making it harder to deliver prices at accessible price points for entry-level buyers and demand is softening.
Slower construction will prevent major gains in total inventory that helps balance the market between buyers and sellers but there has been a steady climb in the existing market in a trend that continued into March. Homes have been sitting on the market longer recently in a shift that has improved the supply, though that trend reversed in March with properties on the market for an average of 36 days, compared to 42 days in February.
Inventory of existing homes jumped 8.1% in March from February, equivalent to a four-month supply at the current sales pace. The market is considered balanced between buyers and sellers when there is a five- to six-month supply.
{“uri”:“klewtv.com”,“dataType”:“news”,“title”:“KLEW”,“description”:“KLEW CBS 3 is Lewiston, Idaho’s news leader, providing coverage of local and national stories, weather, sports and local events in Lewiston and surrounding towns and communities, including Genesee, Moscow, Lapwai, Spalding, Culdesac, Juliaetta and Troy, Idaho and Clarkston, Uniontown, Colton, Pullman, Asotin and Anatone, Washington.”}klewtv.com