Market Overview

The spring housing market has seen a sluggish start due to higher mortgage rates and economic uncertainty. According to the National Association of Realtors (NAR), previously owned home sales dropped by 5.9% from February, leading to a seasonally adjusted annualized rate of 4.02 million units. This marks the slowest sales pace for March since 2009.

Sales Figures and Regional Insights

The decline in sales was not only significant month-over-month but also represented a 2.4% decrease from March 2024. All regions experienced a downturn, with the West facing the steepest decline at over 9%. Notably, this region did see a year-over-year increase, primarily driven by robust activity in the Rocky Mountain states, which benefit from strong job growth.

This sales data reflects contracts that were likely signed during January and February when the average rate for a 30-year fixed mortgage exceeded 7%. It wasn’t until February 20 that rates fell below this threshold, according to Mortgage News Daily.

Impact of High Mortgage Rates

Lawrence Yun, NAR’s chief economist, emphasized that home buying activity remained subdued in March, attributing this to affordability hurdles linked to elevated mortgage rates. He mentioned, “Residential housing mobility, currently at historical lows, signals the troublesome possibility of less economic mobility for society.”

Inventory Levels and Market Dynamics

Despite a drop in sales, the availability of homes for sale saw a notable increase. By the end of March, inventory rose almost 20% compared to March 2024, totaling 1.33 million units. At the current sales pace, this represents about a four-month supply—traditionally viewed as low, as a six-month supply indicates a balanced market between buyers and sellers.

Price Trends and Buyer Demographics

The increase in inventory coupled with slow sales has started to exert downward pressure on home prices. The median price for an existing home in March reached $403,700, an all-time high for the month, yet it reflects only a 2.7% annual increase—the smallest since August 2024.

Yun reported, “In a stark contrast to the stock and bond markets, household wealth in residential real estate continues to reach new heights.” The Federal Reserve’s flow of funds recorded a real estate asset valuation of $52 trillion, indicating that each percentage increase in home prices contributes over $500 billion to household balance sheets.

In terms of market composition, first-time buyers constituted 32% of the market in March, comparable to the previous year, though this figure is below their historical average of approximately 40%. Meanwhile, all-cash sales decreased to 26%, down from 28% a year earlier, while investors maintained a steady 15% share of transactions.

Future Projections

The NAR has noted a rise in canceled contracts during March, a trend that may escalate given the ongoing volatility in the stock market observed in April. Economic expert Robert Frick from Navy Federal Credit Union warned, “March numbers are bad, but they’re likely to get worse,” highlighting concerns regarding high prices and mortgage rates as well as potential increases in home furnishing costs due to tariffs and growing consumer apprehensions over inflation and job stability.