The U.S. housing market saw a sluggish start to the spring homebuying season in March as elevated mortgage rates and rising prices deterred prospective buyers. According to data released by the National Association of Realtors (NAR), sales of previously owned homes declined by 5.9% from February, reaching a seasonally adjusted annual rate of 4.02 million units. This marked the steepest monthly drop since November 2022 and the slowest March sales pace since 2009. Year-over-year, existing home sales were also down 2.4%, falling short of economists’ expectations of 4.12 million units.
Lawrence Yun, chief economist at NAR, attributed the market’s stagnation to mortgage rates, which have remained elevated after briefly rising above 7% in January. Although the average 30-year mortgage rate dipped slightly to 6.81% in April, it still presents a significant hurdle for many homebuyers. Yun warned that sluggish residential housing mobility could reflect broader economic stagnation. In March, the median home sale price climbed 2.7% year-over-year to $403,700, marking an all-time high for the month, though it was the smallest annual increase since August.
New Home Sales Show Resilience Amid Shifting Buyer Behavior
While existing home sales declined, new home sales surged, rising 7.4% from February and 6% compared to March 2024. This growth was buoyed by homebuilders offering incentives such as mortgage rate buydowns and prioritizing more affordable, smaller homes. As a result, the median price of newly built homes fell to $403,600. This shift helped close the typical price gap between new and existing homes, which historically hovered around a 15%-20% premium.
In contrast, the existing home market skewed toward higher-end properties. NAR reported a 14% increase in sales of homes priced at $1 million or more, while sales of lower-priced homes between $100,000 and $250,000 declined 4%. Wealthier buyers, often able to pay in cash or better weather high rates, continued to dominate upper-tier home sales. Meanwhile, first-time buyers and those without existing home equity faced mounting affordability challenges, compounded by years of price increases.
Rising Inventory and Buyer Incentives Fail to Spur Sales
Despite the sales slowdown, housing inventory saw a noticeable uptick in March. The number of unsold homes rose to 1.33 million, an 8.1% increase from February and nearly 20% higher than the same month last year. This equates to a four-month supply at the current pace of sales—still short of the five- to six-month range considered a balanced market. Also lingered longer on the U.S. housing market, with the average listing lasting 36 days before sale.
Sellers increasingly responded with concessions and price reductions to attract buyers. According to Redfin, 44.4% of U.S. home sales in the first quarter included some form of seller concession, up from 39.3% a year earlier. Zillow data also revealed that over 23% of listings saw price cuts in March—the highest rate for any March since at least 2018. Yet, for many buyers, especially those entering the market for the first time, these trends are not enough to offset the long-term rise in home prices, which have surged nearly 50% over the past five years.
As Lisa Sturtevant, chief economist at Bright MLS, observed, “Uncertainty and anxiety are going to cloud the spring U.S. housing market this year,” highlighting the cautious approach many buyers are adopting amid ongoing economic unease.
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