US home sales post second straight monthly drop; house prices accelerate

us home sales post second straight monthly drop; house prices accelerate

FILE PHOTO: New townhomes are seen under construction while building material supplies are in high demand in Tampa, Florida, U.S., May 5, 2021. REUTERS/Octavio Jones/FIle Photo

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. existing home sales unexpectedly fell in April as higher mortgage rates and house prices weighed on demand, dealing another setback to the housing market.

Though the report from the National Association of Realtors on Wednesday showed inventory increasing last month to a 2-1/2-year high entry-level homes remained scarce, accounting for the second straight monthly decline in sales.

The housing market has taken a step back after residential investment, which includes homebuilding, grew at its fastest pace in more than three years in the first quarter amid a resurgence in mortgage rates.

"Supply constraints are doing as much to hold back sales as demand-side weakness," said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. "Existing home sales will probably tread water, or perhaps even edge down a bit further, over the next few months."

us home sales post second straight monthly drop; house prices accelerate

A "For Rent, For Sale" sign is seen outside of a home in Washington, U.S., July 7, 2022. REUTERS/Sarah Silbiger/File Photo

Home sales slipped 1.9% last month to a seasonally adjusted annual rate of 4.14 million units. Economists polled by Reuters had forecast home resales would rise to a rate of 4.21 million units. Home resales are counted at the closing of a contract.

April sales likely reflect contracts signed in the prior two months when the average rate on the popular 30-year fixed-rate mortgage was hovering just below 7%.

Sales fell in all four regions. The average rate on the 30-year fixed-rate mortgage has struggled to break back below 7% after surging to more than a five-month high of 7.22% in early May, data from mortgage finance agency Freddie Mac showed.

Government data last week showed single-family housing starts and building permits fell in April. Homebuilder confidence deteriorated considerably in May.

Economists do not expect a significant decline in mortgage rates until the Federal Reserve starts cutting interest rates. The U.S. central bank has raised its benchmark overnight interest rate by 525 basis points since March 2022 to dampen demand in the economy and control inflation.

The Fed has kept its policy rate unchanged in the current 5.25%-5.50% range since July. Financial markets expect the central bank to start its easing cycle in September.

Home resales, which account for a large portion of U.S. housing sales, fell 1.9% on a year-on-year basis in April.

Residential investment is expected to slow considerably in the second quarter after notching double-digit growth in the January-March quarter.

Stocks on Wall Street were mixed. The dollar rose against a basket of currencies. U.S. Treasury prices fell.

SUPPLY RISES

Housing inventory increased 9% to 1.21 million units last month, the highest level since October 2021. Supply jumped 16.3% from one year ago.

Nonetheless, supply remains below the 1.8 million units reported for April 2019, months before the COVID-19 pandemic.

Many homeowners have mortgage rates below 4%. The so-called "rate lock" is starving the housing market of supply.

Properties typically stayed on the market for 26 days in April, up from 22 days a year ago. About two-thirds of houses went under contract within a month of listing, consistent with still-tight housing supply.

The rise in inventory was concentrated in homes priced $1 million or more, where supply rose 34% from a year ago. Sales in this price bracket soared 39.7% from a year ago. In contrast, houses priced $100,000 and below saw sales declining 7.1%. Sales in the $100,000-250,000 price range edged up 0.1%.

"It is a very frustrating market out there," said Lawrence Yun, the NAR's chief economist.

At April's sales pace, it would take 3.5 months to exhaust the current inventory of existing homes, up from 3.0 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.

The median existing home price shot up 5.7% from a year earlier to $407,600, the highest price for any month of April. Home prices rose in all four regions. At least 27% of houses sold last month were above the listing price, indicating the prevalence of multiple offers in some areas.

"These dynamics should remain in place until mortgage rates drop enough to entice more existing homeowners to sell," said Ben Ayers, senior economist at Nationwide. "Unfortunately, mortgage rates are unlikely to decline meaningfully until 2025."

First-time buyers accounted for a third of sales, the highest share since January 2021 and up from 29% a year ago. That share remains below the 40% that economists and realtors say is needed for a robust housing market.

All-cash sales made up 28% of transactions in April, unchanged from a year ago. Distressed sales, mostly foreclosures, represented only 2% of transactions. This share has steadily risen from 1%, the rate that had prevailed for the past year.

"Borrowing costs will fall from where they are now, but not enough to fully offset mortgage rate 'lock-in' effects, which will continue to hold back sales volumes," said Thomas Ryan, North America economist at Capital Economics.

(Reporting by Lucia Mutikani; Editing by Paul Simao and Cynthia Osterman)

OTHER NEWS

16 minutes ago

Serbia exit Euros frustrated at what might have been

16 minutes ago

Singaporean households can now redeem $300 CDC vouchers

16 minutes ago

Rivian soars after new joint venture partner Volkswagen invests $5B

16 minutes ago

Orchard Road fatal brawl: Man who punched, kicked victim jailed over 12 months

17 minutes ago

Video: Jessica Alba shows off her fit figure in athleisure wear in Beverly Hills - as her film Trigger Warning leads Netflix top 10

17 minutes ago

Video: Jackie O Henderson gets 'busted on camera' checking out a young guy in Greece during fun European holiday with her best friend Gemma

17 minutes ago

Video: Dramatic court scenes as Jocelyn Nungaray's family hear how she fought with her dying breath 'as migrants raped her'

17 minutes ago

Thousands of DNC protesters expected, raising questions about security, neighborhood impact

19 minutes ago

NYC building’s quirky signs could be painted over with trendy Fendi ads: ‘An architectural crime’

19 minutes ago

Swimmers warned of more life-threatening rip currents along US beaches after multiple deaths

21 minutes ago

Stellantis may cease production at Ellesmere Port and Luton without more EV help

21 minutes ago

‘I don’t think I’ve lost a step’ — Kyle Van Noy ready to build on his career year in Baltimore

21 minutes ago

Today on Pinstripe Alley - 6/25/24

21 minutes ago

Julian Assange plea deal criticised, celebrated by US political world

21 minutes ago

Miami Dolphins not offering Tua Tagovailoa “market value” contract

21 minutes ago

Mobile detection cameras will catch NSW drivers who don’t wear seatbelts from July 1

21 minutes ago

‘The beauty of ordinary life’: Julian Assange’s father hopes freed son finds peace

22 minutes ago

Gareth Southgate hits out at ‘unusual environment’ around England team at Euro 2024

22 minutes ago

NFL, Hallmark team up for a Chiefs Christmas love story

22 minutes ago

Morgan Stanley's Wilson Says the Market Makes Sense

22 minutes ago

Ravens coach John Harbaugh shares his excitement about OT Ronnie Stanley

22 minutes ago

Vikings defensive line rated among 5 worst in NFL

22 minutes ago

Three weeks after a landslide, Wyoming will reopen a highway critical for commuters

22 minutes ago

Lions defensive line ranked top 5 in NFL

22 minutes ago

Build the Ultimate Passive-Income Portfolio With Just $10,000

22 minutes ago

Everything You Need To Know about the Benefits and Uses of Palo Santo

22 minutes ago

Why Labour’s electric car crusade risks crushing Britain’s auto industry

22 minutes ago

Blue Jays’ Guerrero Jr. softens stance on possibly playing for Yankees

22 minutes ago

Commanders move former Super Bowl MVP back into personnel role

22 minutes ago

2 REITs on My Radar as Interest Rates Drop

22 minutes ago

Investors should stay in high-quality names, says Charles Schwab's Liz Ann Sonders

22 minutes ago

Failure to get best version of Phil Foden is England’s fundamental flaw

22 minutes ago

Nobel prize economists warn a Trump win will lead to even higher inflation

22 minutes ago

Declan Rice defiant as England look to press on against Slovenia

22 minutes ago

Video: Netherlands 2-3 Austria: Marcel Sabitzer's winner sees Ralf Rangnick's side edge Euro 2024 five-goal thriller - with beaten Oranje now on a collision course with England in the last 16

22 minutes ago

Former ‘Bob’s Burgers’ Actor Jay Johnston Will Plead Guilty To Federal Charges Over January 6 Capitol Siege – Update

22 minutes ago

Scarlett Johansson Teases “Incredible” ‘Jurassic World 4’ Script & Says She’s Wanted To Join The Franchise For Over 10 Years

22 minutes ago

Manitobans shopping in the U.S.: Experts say it’s not as good a deal as before

22 minutes ago

Ford government didn’t need to close science centre, firm that designed it says

22 minutes ago

Haisla Nation signs off on multi-billion-dollar Cedar LNG plant for B.C. coast