The spring housing market’s showing significant signs of strain. Existing home sales in April dropped to levels not seen for that month since 2009.
Sales fell 0.5% from March to a seasonally adjusted annual rate of 4 million units, according to the National Association of Realtors (NAR).
That’s a 2% decrease compared to April of last year, falling short of economists’ expectations of a 2.7% gain.
Housing struggles persist despite strong job market
The housing market continues to underperform despite robust employment figures.
“Home sales have been at 75% of normal or pre-pandemic activity for the past three years, even with 7 million jobs added to the economy,” noted Lawrence Yun, NAR’s chief economist.
This disconnect points to deeper structural issues affecting home purchases.
The April sales figures reflect contracts likely signed in February and March, before mortgage rates climbed further in April, suggesting the slowdown may intensify in the coming months.
Rising inventory offers a silver lining
A welcome development for potential buyers is the increase in available homes. Inventory increased 9% from March and was about 21% higher than April 2024.
The 1.45 million homes for sale represent a 4.4-month supply at the current sales pace — the highest level in five years. However, it’s still below the six-month supply considered indicative of a balanced market.
This inventory growth is beginning to affect pricing dynamics. The median price of an existing home sold in April was $414,000, a year-over-year increase of 1.8%.
While this marks the highest April price on record, it’s the slowest appreciation since July 2023, with price declines occurring in both the South and West regions.
Power gradually shifting in buyers’ favor
The increased inventory and slowing price growth suggest a gradual shift in market conditions.
Yun explained, “At the macro level, we are still in a mild seller’s market. But with the highest inventory levels in nearly five years, consumers are in a better situation to negotiate for better deals.”
Properties remained on the market for an average of 29 days — selling faster than in March but slower than in April of last year.
Contract cancellation rates have also risen, reaching 7% in April, up from a recent average of 3%-4%.
Luxury segment cooling while affordability challenges continue
The high-end market continues to outperform other segments, with sales of homes priced over $1 million increasing nearly 6% from a year ago, while sales of homes in the $100,000–$250,000 range dropped by just over 4%.
However, even these luxury market gains are diminishing, according to Yun.
First-time buyers accounted for 34% of April sales, almost unchanged from last year, indicating persistent challenges for new market entrants despite improving inventory.
The housing market now sits at a crossroads, with substantial pent-up demand remaining unrealized due to economic uncertainty, high prices, and interest rate concerns.
As Yun observed, “Any meaningful decline in mortgage rates will help release this demand” — perhaps the critical catalyst needed to revitalize the struggling housing sector.
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