April’s existing home sales painted a familiar picture of a market still grappling with low supply as sales dropped for the third month in a row, down 2.7% from March to 5.85 million, the National Association of Realtors reported on Friday.
Despite the decline, housing demand is still strong compared to one year ago, evidenced by existing home sales from this January to April, which are up 20% compared to 2020. Continued demand is stoking already red-hot price appreciation, with the median existing home price for all home types in April coming in at $341,600 — up 19.1% from April 2020 as every region recorded a price increase.
Steep competition stirred in part by low mortgage rates, demographic factors and an improving economy is pushing home prices up at the strongest pace in decades, with sales happening at lightning speed and often for well above list price, noted Zillow Economist Matthew Speakman. This elevated level of competition may be starting to wear on buyers’ confidence and could be holding back sales volumes.
“Last month, existing home sales recorded their best bottom line in any April since 2006,” Speakman said. “New listings volume got a decent bump in March and April, and more people believe it’s a good time to sell a home than at any time since the pandemic began.”
While borrowers battle it out in the bidding trenches, unsold inventory sits at a 2.4-month supply at the current sales pace, slightly up from March’s 2.1-month supply and down from the 4-month supply recorded in April 2020.
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According to NAR, these numbers continue to represent near-record lows.
Properties typically remained on the market for 17 days in April, down from 18 days in March and from 27 days in April 2020. Roughly 88% of the homes sold in April 2021 were on the market for less than a month.
Because housing inventory is such a key element right now, Fannie Mae‘s economic and strategic group modified its 2021 predictions. The group said it had expected that a combination of waning COVID-19-induced movement into single-family housing and continued tight inventories would lead to a slowing pace of existing home sales as the year progresses. The group noted that despite year-over-year increases, they can’t push their existing home sales predictions any higher under current circumstances.
NAR also noted the role of inventory in existing home sales.
“We’ll see more inventory come to the market later this year as further COVID-19 vaccinations are administered and potential home sellers become more comfortable listing and showing their homes,” said Lawrence Yun, NAR’s chief economist. “The falling number of homeowners in mortgage forbearance will also bring about more inventory.”
NAR expects the additional projected to cool down the torrid pace of price appreciation later in the year.
However, as Joel Kan, the Mortgage Bankers Association’s associate vice president of economic and industry forecasting pointed out, in the short-term, inventory shortages will persist. U.S. Census Bureau data from earlier this week showed residential housing starts have started to slow due to challenges in the cost and availability of building materials.
First-time buyers, who made up a good share of the 2020 purchase market were responsible for 31% of existing home sales in April, down from 32% in March and 36% in April 2020.
“First-time buyers in particular are having trouble securing that first home for a multitude of reasons, including not enough affordable properties, competition with cash buyers and properties leaving the market at such a rapid pace,” Yun said.
Broken down regionally:
- Existing home sales in the Northeast fell 3.9% from March, but the annual rate of 730,000 represents a 30.4% leap from a year ago. The median price in the Northeast was $381,100, up 22.0% from April 2020.
- Existing home sales in the Midwest grew 0.8% to an annual rate of 1,290,000 in April, a 13.2% increase from a year ago. The median price in the Midwest was $259,300, a 13.5% rise from April 2020.
- Existing home sales in the South decreased 3.7%, recording an annual rate of 2,600,000 in April, up 39.0% from the same time one year ago. The median price in the South was $289,600, a 15.8% jump from one year ago.
- Existing home sales in the West declined 3.1% from the month prior, posting an annual rate of 1,230,000 in April, a 53.8% surge from a year ago. The median price in the West was $501,200, up 19.9% from April 2020