The spring housing market is facing headwinds from elevated interest rates and dampened consumer confidence. According to the National Association of Realtors, sales of previously owned homes decreased by 0.5% in April compared to March, reaching a seasonally adjusted, annualized rate of 4 million units. This marks the slowest April pace since 2009.

Year-over-year, sales were down 2% from April of the previous year, falling short of economists’ expectations of a 2.7% gain. These figures reflect completed transactions, indicating contracts likely signed in February and March, before mortgage rates increased in April.

“Home sales have been at 75% of normal or pre-pandemic activity for the past three years, even with seven million jobs added to the economy,” said Lawrence Yun, NAR’s chief economist. “Pent-up housing demand continues to grow, though not realized. Any meaningful decline in mortgage rates will help release this demand.”

Housing inventory saw a significant boost, climbing 9% from the previous month and nearly 21% compared to April of last year. At the end of April, there were 1.45 million homes available for sale, representing a 4.4-month supply at the current sales pace. This is the highest level in five years, although still below the six-month supply considered indicative of a balanced market. A year prior, the market had a 3.5-month supply.

The increase in supply is beginning to moderate price growth. The median price of an existing home sold in April was $414,000, a modest 1.8% increase year-over-year. While this marks the highest April price on record, it also represents the slowest recognition as July 2023. In contrast, annual price gains were considerably higher in the previous year. The South and West regions experienced price declines.

“At the macro level, we are still in a mild seller’s market,” Yun said. “But with the highest inventory levels in nearly five years, consumers are in a better situation to negotiate for better deals.”

Homes remained on the market for an average of 29 days, a quicker pace than in March but longer than in April of the prior year. First-time buyers accounted for 34% of sales, nearly unchanged from the previous year.

Cancellation rates, reflecting the proportion of terminated contracts, are also on the rise, reaching 7% of sales in April, up from a recent average of 3% to 4%.

Luxury Market Remains Strong

Activity remains more robust in the upper echelons of the market. Sales of homes priced above $1 million surged nearly 6% compared to the previous year, while sales of homes priced between $100,000 and $250,000 declined by just over 4%. However, Yun pointed out that gains in the high-end market are diminishing.

“At the macro level, we are still in a mild seller’s market,” Yun said. “But with the highest inventory levels in nearly five years…”

“I think that is partly due to the stock market shakeout that has occurred,” he said.

Market Conditions Favoring Buyers

the latest real estate data indicates a shifting landscape,presenting potential opportunities for buyers. Increased inventory and moderating price growth suggest a more negotiable environment, notably for those entering the market or seeking to upgrade.